The Goodyear Tire & Rubber Company Annual Report 2001

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FY2001 Annual Report · The Goodyear Tire & Rubber Company

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T H E G O O D Y E A R T I R E & R U B B E R C O M P A N Y

2 0 0 1 A N N U A L R E P O RT

Financial Highlights

To Our Shareholders

Market-Driven Changes

Build Consumer Loyalty

Goodyear Technology Improves

Automotive Safety

Goodyear Offers a Choice in
Run-Flat Tire Systems

2001 Financial Review

Management’s Discussion and Analysis

Consolidated Financial Statements

Notes to Financial Statements

Supplementary Data

Comparison with Prior Years

Report of Management

Report of Independent Accountants

Board of Directors and Officers

Goodyear Worldwide

Shareholder Information

Shareholder Discount Coupon

ABOUT GOODYEAR

Goodyear is the world’s largest tire company. Together
with its U.S. and international subsidiaries and joint
ventures, Goodyear manufactures and markets tires for
most applications. It also manufactures and sells several
lines of power transmission belts, hose and other rub-
ber products for the transportation industry and various
industrial and consumer markets, as well as rubber-
related chemicals for various applications. Goodyear is
the world’s largest operator of commercial truck service
and tire retreading centers. In addition, it operates
more than 2,000 tire and auto service center outlets.
Goodyear manufactures its products in 96 facilities in
28 countries. It has sales and marketing operations in
almost every country around the world.

ABOUT THE COVER

The new Goodyear Eagle F1 GS-D3 high-performance
tire combines the technology of a racing tire with opti-
mum safety and comfort for everyday use. Inspired by
three decades of success in Formula One racing, the
tire’s uninterrupted shoulder-to-shoulder treadblock
allows it to get as close as possible to the performance
of a racing tire and still be suitable for the open road.
Introduced in March 2002 in Europe, the tire will be
available for North American motorists later this year.

S A F E J O U R N E Y S
O N T H E W I N G S O F G O O D Y E A R

Goodyear is a company based upon a simple proposi-
tion: transporting our customers, safely and efficiently,
through the journeys of their lives.

These journeys are the fabric of our daily lives –
of our families, our jobs, our play. And while we make
these journeys, our tires form the points of contact
with our world.

Goodyear is based in Akron, Ohio, but our associ-
ates and our customers never forget that we are also
in every city, every town, every mountain pass, every
country lane and every desert road, every day and
every night when someone, somewhere is taking one
of their life’s journeys.

Helping our customers do this, time after time,
year after year, is what has protected our good name
for 104 years.

And it is why people will always feel more

secure and safe, making their journeys on the wings
of Goodyear.

T H E S P I R I T O F G O O D Y E A R
T H E S P I R I T O F G O O D Y E A R

G O O D Y E A R A Q U A T R E D 3
G O O D Y E A R A Q U A T R E D 3

F I N A N C I A L H I G H L I G H T S

(DOLLARS IN MILLIONS, EXCEPT PER SHARE)

YEAR ENDED DECEMBER 31,
2000

2001

Net Sales
Net Income (Loss)

– Per diluted share

Assets
Debt
Equity
Debt to Debt and Equity

Cash Dividends per Share
Common Shares Outstanding
Shareholders of Record
Average Number of Associates

$14,147.2
(203.6)
(1.27)

$14,417.1
40.3
.25

$13,512.9
3,568.3
2,864.0
55.5%

$13,568.0
3,585.8*
3,503.0
50.6%*

1.02

$ 1.20
163,165,698 157,603,962
28,778
106,724

27,822
100,779

*DEBT AND DEBT TO DEBT AND EQUITY IN 2000 EXCLUDES THE SUMITOMO
1.2% CONVERTIBLE NOTE PAYABLE DUE 8/01. REFER TO NOTE 11.

G O O D Y E A R 2 0 0 1
G O O D Y E A R 2 0 0 1

– 1 –
– 1 –

T O O U R S H A R E H O L D E R S

Looking back at a year of both accomplish-

increased prices for consumer replacement tires

ments and disappointments, we can report that at

three times for a total of more than 10 percent.

the end of 2001, Goodyear is much better posi-

Another factor is improving our product mix.

tioned to compete and prosper than it was just one

We intend to grow our more-profitable replacement

year ago. We are ready for the economic rebound.

market business, while exiting some low-margin

Challenged by a multi-national recession

original equipment business.

similar to that experienced in the early 1970s and

The next opportunity is the position of our

weak tire demand in much of the world, our sales

premium brands. We gained market share with the

declined in 2001. High raw materials costs, curren-

Goodyear brand in 2001. We expect this trend to

cy exchange rates, and actions to curtail produc-

continue as consumers’ “flight to quality” acceler-

tion and reduce inventories greatly impacted our

ates in 2002.

bottom line.

During 2002, we plan to launch new market-

Because of the economic conditions, we

ing campaigns to re-introduce the Dunlop brand in

intensified our focus on liquidity in the second

North America. Capitalizing on the brand’s

half. Our efforts were successful. We generated

European heritage and prestige original equipment

$475 million in cash flow during the year. It will be

fitments, we will reinforce Dunlop’s position as a

applied to debt reduction. We ended 2001 with

tire offering superior performance to passionate

almost $1 billion in cash on hand.

drivers. We expect to realize higher awareness of

The bottom line result was a disappointing

the brand and, obviously, increased sales, market

loss. Many steps were taken by our associates dur-

share and profitability.

ing 2001 to return our earnings to more historical

We will target our resources to better market

levels. We expect the company will return to prof-

our Goodyear, Dunlop and Kelly brands in North

itability in 2002.

America and the Goodyear, Dunlop, Fulda and

Pneumant brands in the European Union. To

THE KEYS TO PROFIT IMPROVEMENT

accomplish this, we are discontinuing almost 30

A key factor to improved earnings is achiev-

minor brands from our portfolio. We intend to

ing higher revenue per tire. During 2001, we

retain the more-profitable portion of this volume

increased tire prices in markets around the world.

with our other, better-known, tire brands.

In North America, the world’s largest market, we

G O O D Y E A R 2 0 0 1

– 2 –

Within these brands, we are concentrating on

have plans to offer several new and innovative prod-

higher-margin SUV and performance tire segments.

ucts and services to move past our competitors as

Our tire businesses in North America and

market conditions improve.

Europe have realigned them-

selves into units that focus on

a single group of end users:

replacement consumer tires,

original equipment tires, com-

mercial tire systems and farm

tires. Each of these units con-

trols the resources needed to

understand the requirements

Our Engineered

Products business has simpli-

fied its organization to bring

each associate closer to the

customer. Decision making is

becoming faster. Several new

products are proving popular

with customers.

Goodyear Chemical is

SAMIR G. GIBARA

of their customers and to

CHAIRMAN & CHIEF EXECUTIVE OFFICER

re-focusing on its core basic

develop, design, manufacture,

and high-performance poly-

market and sell the tires to sat-

ROBERT J. KEEGAN

mers and adhesives businesses

isfy them. We anticipate that

this new organization will

increase the speed of our

response to market changes

and lead to improved results.

Already visible is the

renewed vitality this accounta-

bility is giving our commercial

tire systems groups. While this

PRESIDENT & CHIEF OPERATING OFFICER

following the sale of its spe-

cialty chemicals operation in

December. A Six Sigma

process will increase its pro-

ductivity and effectiveness.

UNPRECEDENTED

SUPPLY FLEXIBILITY

While disruptive during

business – which includes new tires, retreads and

2001, significant changes made to our manufactur-

truck service – is presently near the bottom of an

ing and supply chain operations have given us

extended down cycle, the products and services we

unprecedented flexibility to quickly – and

provide offer highly attractive profit margins. We

cost-effectively – increase or decrease capacity as

G O O D Y E A R 2 0 0 1

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market conditions dictate. Employment was reduced

gies despite the economic upheaval in 2001. We

by about 10,000 during the year. We expect to

also completed several rationalization programs

eliminate another 3,500 positions during 2002.

and the integration of our Dunlop tire businesses.

Flexible manufacturing capacity will be espe-

Work continues to shift our supply of low-

cially important during 2002 as the prospects for

margin products to low-cost facilities in Asia,

economic recovery remain uncertain. We have

Eastern Europe and Latin America. Some produc-

taken a conservative view and are planning for

tion – not requiring advanced manufacturing tech-

slow, but steady, economic improvement through-

nology – could be outsourced. Our higher-cost,

out the year. Industry volumes, however, will likely

high-tech manufacturing base in North America

be down from 2001.

and the European Union is best suited to produce

Coupled with this new manufacturing flexi-

highly engineered, high-margin products.

bility, we reduced worldwide inventories by almost

These actions will enable us to lower the

$500 million during the year without any detri-

company’s break-even point, freeing working

mental impact on customer service and supply.

capital and reducing debt. We intend to further

Our manufacturing plants are much more

reduce debt in 2002.

efficient. Tire output per associate is up more than

20 percent from just two years ago. This increased

BREAKTHROUGH MARKET-DRIVEN CHANGE

productivity and Web-based information technolo-

Sometimes market leaders are slightly ahead

gy systems are making it possible to better forecast

of their time. That was the case with our run-flat

market demand and plan production to meet it.

tires. Interest has been high, but sales did not meet

The implementation of “IMPACT,” our auto-

our expectations. This is starting to change.

mated tire manufacturing process, continues. It will

Today, premier tire brands such as Goodyear

be fully in place in all of our worldwide commer-

and Dunlop are gaining customers. The United

cial truck tire facilities by 2004 and is the center-

States government will require tire pressure moni-

piece of the proposed $125 million modernization

toring systems in new vehicles beginning in 2003.

of our Lawton, Oklahoma, tire plant.

And, in a nationwide survey, seven out of eight

Recognizing their long-term value to the

consumers place run-flat tires at the top of their list

organization, we moved forward with these strate-

G O O D Y E A R 2 0 0 1

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of desired new-car safety features. The European

cent of our officers in 1997 had 30 or more years

car industry is also rapidly introducing low-tire-

of service with the company – today, just 40

pressure warning devices.

percent do.

The era of the run-flat tire, led by Goodyear,

has arrived.

MEETING CHALLENGES

Goodyear is the world’s leading manufacturer

Despite the disappointments of 2001, we

of run-flat tires. We expect to have shipped more

cannot lose sight of the accomplishments achieved

than one million units by the end of 2002. We are

by Goodyear associates during the year. Faced with

currently supplying DaimlerChrysler, BMW and

difficult challenges, they called upon the creative

General Motors. Automakers worldwide are testing

strength of our organization and found the solu-

our tires in 50 different projects.

tions that have positioned Goodyear extremely

The same market-driven attention given

well for the economic recovery.

run-flat tires is being applied in other areas of

With the continued support of our share-

our business. Associates across Goodyear are

holders, our customers and a team of the best peo-

focusing on providing superior consumer value,

ple in our industry, we are extremely confident of

converting satisfaction to loyalty and anticipating

Goodyear’s future success.

competitors’ moves.

MANAGEMENT TEAM REJUVENATION

Goodyear continues to revitalize its manage-

ment team, as many of our senior leaders retired

during 2001. A new generation of leaders –

younger and more diverse, some joining us from

other organizations – have ably stepped forward

and taken on larger responsibilities.

In 1997, only two of our officers were age 50

or younger – today, there are ten. Almost 75 per-

Respectfully submitted,

Samir G. Gibara
CHAIRMAN & CHIEF EXECUTIVE OFFICER

Robert J. Keegan
PRESIDENT & CHIEF OPERATING OFFICER

G O O D Y E A R 2 0 0 1

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M A R K E T - D R I V E N C H A N G E S B U I L D
C O N S U M E R L O Y A L T Y

Goodyear’s commitment to becoming a mar-

The Goodyear Aquatred tire, the most successful

ket-driven organization is more than mere words.

new product in the history of the tire industry, is a

It is not a campaign, complete with posters

prime example of this. We created the wet-traction

and a catchy slogan. It is not

clever advertising with memo-

rable jingles.

And, it is not about

re-inventing a successful,

104-year-old company – the

leader of its industry.

It is about rediscovering

and restoring the principles that

have made this company great.

It is about energizing

and refocusing the activities of

Goodyear’s 96,000 associates

around the world toward a

unified purpose – attracting,

developing and keeping loyal

consumers of our products and

services. Loyal consumers

mean higher revenues and

higher profits.

Goodyear has a long tra-

dition of satisfying the needs

of consumers – sometimes

even when they did not know

themselves what they needed.

G O O D Y E A R F O R T E R A
G O O D Y E A R F O R T E R A

Goodyear’s new Fortera tire gives drivers of

luxury sport utility vehicles everything they

want. It offers the rugged look of our popular

Wrangler tires, the sporty handling of our

Eagle high-performance tires and the smooth

ride of a Goodyear Integrity family car tire.

G O O D Y E A R 2 0 0 1

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tire category and have led it

for a decade.

But, being market-driven

is more than developing, man-

ufacturing and selling innova-

tive tires, engineered products

and chemicals. History is lit-

tered with innovative products

that were met with a collective

yawn from consumers.

It is about understanding

the unmet needs of the most-

valuable consumers and learn-

ing how they decide which

products and services will best

satisfy them.

It is about taking that

knowledge and using it to

develop innovative products

and services, promoting them

with integrated marketing

programs and selling them

through the proper distribu-

tion channel at an attractive –

and profitable – price.

A RESOLVE TO SUCCEED

we have created a portfolio of smaller, customer-

Around the globe, from Akron to Valencia

focused businesses. Each controls the resources

and from Brussels to Taipei, Goodyear associates

needed to understand, attract and retain valuable

are making the transition and doing so with a

consumers. And each is responsible for its perform-

resolve that they can overcome any challenges put

ance and profitability.

in their path.

The replacement consumer tire units serve

As our decision making evolves, so too is our

passenger car and light truck tire customers. Our

organization changing. Sales and marketing groups

original equipment tire groups serve major

have been separated, each focusing on its unique

automakers. Commercial tire systems provide new

role and recognizing the vital work of the other

tires, retreads and cradle-to-grave tire services for

discipline. Associates who have joined Goodyear

trucks. Our farm tire units sell a full line of tires for

from other industries bring best practices that

agricultural vehicles, including rubber track.

augment our deep tire industry knowledge.

Also within each region are units that man-

Our manufacturing, logistics and purchasing

age our company-owned retail outlets. Goodyear is

functions have been realigned to eliminate bottle-

one of the world’s largest tire retailers. Using sever-

necks, reduce inventory levels and ensure consis-

al different retail formats, we reach and serve tens

tent product supply for our customers. New

of thousands of consumers each day. Direct access

demand forecasting initiatives will allow us to

to and communications with end-users as they

supply the tires our customers want – on-time –

make purchase decisions are invaluable assets to a

and to do so with lower inventory levels.

market-driven organization.

In North America and the European Union –

Marketing associates provide the linkage

our two largest markets – our regional tire businesses

between our business units and technology groups.

have been reorganized into unique units, each con-

High-tech, innovative products are vital for suc-

centrating on a single, distinct group of end users.

cess, but true leadership comes through advance-

Instead of two large, multi-purposed businesses,

ments that satisfy unmet consumer needs.

G O O D Y E A R 2 0 0 1

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ASSOCIATES ENGAGED IN CHANGE

Consumers needed an all-new tire, not a

Around the world, Goodyear associates in all

compromise.

business functions are engaged and involved in

Goodyear responded with the Fortera, an all-

new tire that provides SUV

drivers with the ride, comfort

and handling of a passenger

car tire with the rugged looks

of an SUV tire. A tire with an

elegant appearance; quiet,

smooth ride; and aggressive

styling.

With the strength of our

powerful brands – and exciting

products such as the Fortera –

we have more repeat customers

than any other tiremaker.

Understanding unmet

consumer needs and quickly

developing new and innovative

products to satisfy them will

drive us to higher revenues

and higher profits.

these changes, giving us the

ability to react quickly to mar-

ket dynamics and providing us

better focus and capability to

profitably serve our customers.

The new Goodyear

Fortera tire for sport utility

vehicles is one of the first

examples of our new market-

driven initiatives.

The first SUVs were

designed to be driven off-road

and did so on Goodyear

Wrangler tires. But, SUVs

quickly grew in popularity and

began to replace cars and

minivans on the highway. The

desire for a smoother ride led

many to our Goodyear

Integrity family car tires.

Those wanting better handling

sought our performance

Goodyear Eagles.

F A R M T I R E S
F A R M T I R E S

From one generation to the next, farmers around

the world depend on Goodyear for a full range

of tires designed and built for the way they

farm. From the Goodyear UltraTorque Radial

and DT824 to Kelly-Springfield’s PowerMark

APR, we make tires for every kind of agricultural

vehicle and for every type of farming.

G O O D Y E A R 2 0 0 1

– 9 –

G O O D Y E A R T E C H N O L O G Y I M P R O V E S
A U T O M O T I V E S A F E T Y

They have always been round, and most of

shows that 81 percent of consumers want a tire

them will always be black. But technological

that “is safe in all driving conditions.”

advancements are leading to higher-quality tires

In fact, the top six consumer tire attributes

are all safety- or handling-

related.

Consumers say they

want tires that “keep my fami-

ly safe.” Tires that “handle well

on all types of road surfaces”

and “hold the road in sudden

stops.” Tires that “prevent

hydroplaning” and “handle

well in snow and ice.”

Another research study

shows that seven out of eight

consumers place run-flat tires

at the top of their list of

desired automotive safety

equipment.

And yet another indi-

cates that 90 percent of con-

sumers believe all tires are not

the same.

that can improve the safety of

almost anything with wheels.

Goodyear technology –

technology that matters – is

leading this change.

With decades of work

toward improving tire safety as

their base, Goodyear

researchers are designing

tomorrow’s run-flat tire,

tomorrow’s low-pressure warn-

ing system and even tires that

adjust their own air pressure as

they roll down the road.

Goodyear’s safety focus

is not new. It has been part

of the company’s culture for

104 years.

What is new is the con-

sumers’ increased attention to

tire safety. Current research

G O O D Y E A R G T 3 B I O T R E D
G O O D Y E A R G T 3 B I O T R E D

The Goodyear GT3 tire is the first to use

BioTRED, our patented rubber compound that

replaces oil-derived carbon black with a starch

made from corn. It offers significant improve-

ments in fuel economy, performance and safety.

The environmentally friendly tire has attracted

the attention of European consumers, as well as

vehicle manufacturers.

G O O D Y E A R 2 0 0 1

– 11 –

CRITICAL SAFETY COMPONENTS

receive more information about their tires and

Tires are clearly not a commodity. They are

about how to care for them.

critical safety components on today’s modern

Goodyear technology – meshed with that of

vehicles. And, they are a safety

component that is too often

taken for granted.

According to the U.S.

National Highway Traffic

Safety Administration, nine

percent of passenger vehicles

have at least one bald tire.

One-third of light trucks and

27 percent of cars have at least

one tire that is substantially

under-inflated.

The United States gov-

ernment has recognized this

and, beginning next year, will

require new vehicles to have a

built-in tire pressure monitor-

ing system and that motorists

our partners with expertise in

electronics, sensors and wire-

less communication – will

make this possible.

We expect, by the end

of next year, to introduce and

begin selling a totally integrat-

ed tire monitoring system that

alerts drivers to low pressure

and high temperatures.

With the needed moni-

toring system already on

board, the adoption of run-flat

tires will increase. The conver-

sion is already underway.

Goodyear run-flat tires are

under evaluation by major

automakers around the world

for 50 different projects.

D U N L O P S P S P O R T A 2
D U N L O P S P S P O R T A 2

Dunlop’s newest all-season high-performance

tire, the SP Sport A2, was designed for con-

sumers who want more than just exceptional

handling. It also offers the ride comfort, low

noise and long mileage of a premium touring tire

and the confident control of an all-season radial.

G O O D Y E A R 2 0 0 1

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TIRE TECHNOLOGY ADVANCEMENTS

Our BioTRED rubber compound, used in

Thanks to Goodyear advancements in tire

Europe’s Goodyear GT3 tires, features a corn-based

design technology, the run-flat tires on these vehi-

polymer that replaces oil-derived carbon black.

cles will weigh less and be smoother riding than

This environmentally friendly tire boosts fuel econ-

those made just three years ago.

omy and stops faster on wet pavement than con-

Breakthroughs in manufacturing technology,

ventional tires.

including our advanced “IMPACT” automated sys-

More future-oriented advancements could

tem, will allow us to produce these tires at a lower

include tires made of urethane and other non-rub-

cost. The product quality benefits coming from

ber materials that open new frontiers in run-flat

these advancements extend through our entire

technology, tread wear, fuel economy and recycla-

tire line.

bility. And, these tires might not be black.

Further advancements will integrate auto-

Combining this tire and electronics knowl-

matic tire inflation systems, making regular visits

edge with the molded products expertise in our

to the nearest air pump a thing of the past.

Engineered Products business is moving Goodyear

Beyond run-flats, Goodyear technology is

toward developing systems that control how these

making tires safer through tread designs that push

elements interact on a vehicle.

water away from the tire, rubber compounds that

Whatever the direction of their work,

grip icy pavement, reinforced sidewalls that resist

Goodyear’s researchers, engineers and manufactur-

rock punctures and advanced reinforcements that

ing associates are unified on the destination.

reduce road hazard damage.

Providing the ultimate in tire quality performance

and safety – today and tomorrow.

G O O D Y E A R 2 0 0 1

– 13 –

G O O D Y E A R O F F E R S A C H O I C E
I N R U N - F L A T T I R E S Y S T E M S

Goodyear – the pioneer and leader in run-flat

This is the optimum time for Goodyear and

tires and tire pressure monitoring devices – is

the world’s automakers to work closely together to

looking beyond tires to providing customers with

make run-flat tire systems standard on tomorrow’s

complete run-flat tire systems.

Our engineers developed

Goodyear’s first run-flat tire in

the 1930s. The design proved

itself worthy on military vehi-

cles during World War II.

Sixty years and dozens

of improvements later,

Goodyear run-flat tires

became standard equipment

on the Chevrolet Corvette

and Plymouth Prowler.

Today, our run-flat tires

are offered as original equip-

ment on the hot, retro-styled

Mini. BMW – the manufactur-

er of the Mini – is also using

Goodyear run-flat tires on its

G O O D Y E A R E A G L E P D
G O O D Y E A R E A G L E P D

Goodyear’s Eagle Pd synchronous belts are

moving beyond their industrial roots. 2001

International Hot Rod Association Driver of

the Year Clay Millican is using them on the

blower drive of his top fuel dragster. A day of

racing with traditional straight-tooth belts used

to require a belt change between each round.

With Eagle Pd, Millican can race all day with-

3 Series cars sold in the

out changing belts.

United States.

Goodyear is the world

vehicles. Beginning in 2003,

vehicles sold in the United

States must have air pressure

monitoring systems.

Consumer interest in

vehicle – and tire – safety is at

an all-time high. Seven out of

eight U.S. consumers place

run-flat tires at the top of their

list of desired automotive safe-

ty equipment.

Discussions have already

been held with all major

North American and European

automakers about our run-flat

system technologies and their

vehicle platforms. The results

have been positive. Auto-

makers worldwide are evaluat-

ing our run-flat tires for

50 different projects.

leader in the supply of run-flat tires to the global

With our strategic partners, Goodyear has

automotive industry. We will have shipped more

the world’s largest portfolio of run-flat tire system

than one million run-flat tires by the end of 2002.

products. Goodyear can offer run-flat tires with

G O O D Y E A R 2 0 0 1

– 14 –

three different support systems, three different air

Our run-flat tire expertise does not end at

pressure monitoring and warning technologies and

the pavement’s edge. Goodyear run-flat ATV tires

tire self-inflation systems. Plus, we can provide

let off-roaders continue to work and play, even

automakers with run-flat tires

already mounted on wheels

with sensors attached.

We recognize that driv-

ers of sports cars, minivans and

luxury cars expect different

performance characteristics of

their vehicles. And, satisfying

those consumers is not possi-

ble with a one-size-fits-all run-

flat tire.

Goodyear can provide

integrated run-flat tire system

solutions that match our origi-

nal equipment customers’

needs. And, we have in place

new proprietary manufacturing

technology to supply cus-

tomers from Goodyear and

Dunlop plants in North

America, Europe and Japan.

with a punctured tire. And,

Goodyear is the exclusive sup-

plier of run-flat and self-inflat-

ing tires for Hummer vehicles

used by military units

throughout the world.

Beyond original equip-

ment applications, Goodyear

run-flat tires are more attrac-

tive to consumers than ever

before.

Today’s run-flat tire

designs weigh less and cost

less than those we sold just

three years ago. And, our air

pressure monitoring systems

can operate via radio signals

through a sensor chip built

into the tire.

Installation is available

at more than 3,000 Goodyear

retail locations already certi-

fied to service run-flat tires.

G O O D Y E A R G P S 3 S P O R T
G O O D Y E A R G P S 3 S P O R T

The new Goodyear GPS 3 Sport tire, sold in

our Latin America region, is a premium passen-

ger car tire designed to top its category in terms

of performance, safety and mileage. It has been

designed to meet the needs of specific con-

sumer groups who make tire purchase decisions

based on durability, performance and value.

G O O D Y E A R 2 0 0 1

– 16 –

2 0 0 1 F I N A N C I A L R E V I E W

Management’s Discussion and Analysis

Consolidated Financial Statements

Notes to Financial Statements

Supplementary Data

Comparison with Prior Years

Report of Management

Report of Independent Accountants

Board of Directors and Officers

Goodyear Worldwide

Shareholder Information

G O O D Y E A R 2 0 0 1

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

RESULTS OF OPERATIONS
(All per share amounts are diluted)

CONSOLIDATED
Net sales in 2001 were $14.15 billion, compared to $14.42
billion in 2000 and $13.36 billion in 1999.

A net loss of $203.6 million, $1.27 per share, was
recorded in 2001, compared to net income of $40.3 mil-
lion, $.25 per share, in 2000 and $243.2 million, $1.53
per share, in 1999.

NET SALES
Worldwide tire unit sales in 2001 were 219.3 million units,
a decrease of 4.0 million units or 1.8% compared to 2000.
North American (U.S. and Canada) volume decreased 3.9
million units or 3.4% in 2001, while international unit sales
decreased .1 million units or .1%. Worldwide replacement
unit sales decreased 1.6% in 2001, primarily in Europe and
Latin America. Original equipment unit sales were 2.2%
lower in 2001, primarily in North America and Eastern
Europe.

Worldwide tire unit sales in 2000 were 223.3 million
units, 11.4% higher than in 1999. The Dunlop businesses
contributed 37.3 million units during 2000, compared to
14.4 million units in 1999. Total North American volume
increased 6.3% from 1999 while international unit sales
increased 17.5%. Worldwide original equipment unit sales
rose 10.7% from 1999, with increases in all regions outside
of North America. Replacement unit sales increased 11.7%,
primarily in the European Union and North America.

Revenues decreased 1.9% in 2001 primarily due to lower

tire unit sales and the effect of currency translation on
international results. Goodyear estimates that versus 2000,
currency translation adversely affected revenues by approxi-
mately $395 million.

Revenues increased 7.9% in 2000 due primarily to high-

er tire unit sales. The Dunlop businesses, acquired on
September 1, 1999, contributed $2.26 billion to 2000 sales,
compared to $873.4 million in 1999. Revenues in 2000 were
adversely impacted by the effect of currency translation on
international results, primarily in Europe, where the average
value of the Euro versus the U.S. dollar dropped 13.0%
from the 1999 average rate. Goodyear estimates that versus
1999, currency movements adversely affected revenues in
2000 by approximately $450 million.

COST OF GOODS SOLD
Cost of goods sold (CGS) was 82.1% of sales in 2001,
compared to 80.7% in 2000 and 81.1% in 1999. CGS
reflected higher conversion costs resulting from lower
levels of plant utilization as Goodyear reduced finished
goods inventory levels, as well as higher raw materials
costs. Goodyear estimates that production cutbacks relative
to 2000 levels resulted in approximately $320 million of
underabsorbed costs due to less efficient absorption of
fixed costs during 2001. Costs were favorably impacted
by the effects of the previous rationalization actions and
ongoing cost containment measures.

Goodyear expects that the cost of energy and raw
materials will remain at 2001 levels or decrease slightly. In
addition, in 2000 Goodyear negotiated a new labor
agreement in the United States that is anticipated to contin-
ue to result in higher costs in future periods. These costs
may not be recoverable due to pricing pressures present in
today’s highly competitive market.

CGS in 2000 increased in dollars, but decreased as a per-

cent to sales compared to 1999 due primarily to the effects
of rationalization actions, ongoing cost containment meas-
ures and synergies realized in part from the strategic alliance
with Sumitomo. Margins were adversely affected by the
worldwide competitive pricing environment and a change in
product and market mix to lower margin tires.

Research and development expenses are included in
CGS and were $375.5 million in 2001, compared to $423.1
million in 2000 and $438.0 million in 1999. Research and
development expenditures in 2002 are expected to be
approximately $375 million.

SELLING, ADMINISTRATIVE AND GENERAL EXPENSE
Selling, administrative and general expense (SAG) in 2001
was 15.9% of sales, compared to 15.5% in 2000 and 15.1%
in 1999. SAG increased in dollars and as a percent to sales
in 2001 primarily due to increased warehousing and
distribution costs in North America. SAG decreased in all
international SBUs due to cost containment initiatives and
the favorable effect on SAG of foreign currency exchange
rates. SAG increased in 2000 compared to 1999 due to
the acquisition of, and higher SAG levels at, the Dunlop
businesses. SAG benefited in 2000 from the favorable
impact of ongoing worldwide cost containment measures.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

EBIT
Consolidated EBIT is computed as follows: net sales less
CGS and SAG. Consolidated EBIT was $278.9 million in
2001, $542.5 million in 2000 and $506.4 million in 1999.
Consolidated margin (consolidated EBIT divided by con-
solidated sales) was 2.0% in 2001, 3.8% in 2000 and 3.8%
in 1999.

INTEREST EXPENSE
Interest expense in 2001 was $292.4 million, compared to
$282.6 million in 2000 and $179.4 million in 1999. Interest
expense increased due to higher average debt levels.

OTHER (INCOME) AND EXPENSE
Other (income) and expense was $11.8 million in 2001,
compared to $27.8 million in 2000 and $(147.1) million in
1999. Other (income) expense in 2001 included gains of
$17.0 million ($13.9 million after tax or $.09 per share)
resulting from the sale of land and buildings in the United
Kingdom and $27.4 million ($16.9 million after tax or $.10
per share) resulting from the sale of Goodyear’s specialty
chemical business.

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

During 1999, other (income) and expense included a
gain totaling $149.7 million ($143.7 million after tax or
$.90 per share) on the change in control of 25% of the
European businesses contributed to Goodyear Dunlop Tires
Europe B.V. by the Company. In addition, proceeds of
$17.0 million ($11.1 million after tax or $.07 per share)
were realized in 1999 from Goodyear’s sale of customer lists
and formulations in connection with its exit from the pro-
duction of certain rubber chemicals.

Other (income) and expense included accounts receiv-
able sales fees and commitment fees totaling $53.3 million,
$43.9 million and $34.6 million in 2001, 2000 and 1999,
respectively.

For further information, refer to the note to the financial

statements No. 4, Other (Income) and Expense.

FOREIGN CURRENCY EXCHANGE
Foreign currency exchange expense was $.1 million in 2001,
while income was recorded totaling $6.7 million in 2000 and
$27.6 million in 1999. Foreign currency exchange in 1999
benefited from the impact of currency movements on U.S.
dollar denominated monetary items, primarily in Brazil.

EQUITY IN EARNINGS OF AFFILIATES
Equity in earnings of affiliates was a loss of $40.6 million in
2001, compared to a loss of $22.4 million in 2000 and
income of $10.3 million in 1999. The losses in 2001 and
2000 were due primarily to operating losses and rationaliza-
tion charges incurred by South Pacific Tyres, Ltd. (SPT), an
Australian tire manufacturer in which Goodyear owns a
50% equity interest. Goodyear’s share of rationalization
charges recorded by SPT in 2001 and 2000 totaled approxi-
mately $24.0 million ($24.0 million after tax or $.15 per
share) and $16.1 million ($10.5 million after tax or $.07 per
share), respectively.

INCOME TAXES
Goodyear had a tax benefit at an effective tax rate of 25.4%
for 2001. Goodyear’s effective tax rate was 20.0% and
16.7% in 2000 and 1999, respectively. The effective rate in
2000 increased from 1999 due to the nontaxable character
of the $149.7 million gain in 1999 resulting from the
change in control of 25% of Goodyear’s businesses con-
tributed to the European joint venture with Sumitomo.

For further information, refer to the note to the financial

statements No. 16, Income Taxes.

RATIONALIZATION ACTIVITY
To maintain global competitiveness, Goodyear has imple-
mented rationalization actions over the past several years
for the purpose of reducing over-capacity, eliminating
redundancies and reducing costs. Goodyear recorded net
rationalization costs of $206.8 million in 2001, $124.1 mil-
lion in 2000 and $171.6 million in 1999. Goodyear has
reduced employment levels by approximately 9,900 from
December 31, 2000 and almost 19,000 since 1998, primarily
as a result of rationalization activities.

FOURTH QUARTER 2001 PROGRAM
Goodyear recorded a net rationalization charge on the
Consolidated Statement of Income totaling $127.8 million
($101.2 million after tax or $.62 per share) in the fourth
quarter of 2001, which included a $4.1 million reversal of
reserves no longer needed for their originally intended pur-
poses. These actions were in response to continued competi-
tive conditions in the markets served by Goodyear and
worldwide economic uncertainty. Under these actions,
Goodyear has provided for worldwide associate reductions
through retail and administrative consolidation and manufac-
turing plant downsizing and consolidation. Goodyear antici-
pates that, upon completion of these actions, it will further
reduce annual operating costs by approximately $85 million.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

The 2001 fourth quarter actions included associate-relat-

ed costs of $58.8 million for the release of approximately
2,200 associates around the world, primarily production and
administrative associates in Europe. During 2001, approxi-
mately 300 associates were released under this program at a
cost of $1.6 million, however, a significant amount of the
payments related to these associates will be incurred during
2002. Rationalization costs, other than associate-related
costs, totaled $73.1 million and were primarily for the
writeoff of equipment taken out of service and noncan-
cellable lease contracts. During 2001, Goodyear incurred
$42.5 million of these costs for the writeoff of equipment
taken out of service. The remaining reserve for costs related
to the completion of these actions was $87.8 million at
December 31, 2001.

FIRST QUARTER 2001/FOURTH QUARTER 2000 PROGRAM
Goodyear recorded a rationalization charge totaling $79.0
million ($57.1 million after tax or $.36 per share) in the
2001 first quarter. Of the $79.0 million charge, $12.5 mil-
lion related to the closure of Goodyear’s manufacturing
facility in Italy announced in 1999 and $66.5 million con-
tinued the rationalization program announced in the fourth
quarter of 2000.

Goodyear recorded a rationalization charge totaling
$124.1 million ($100.1 million after tax or $.63 per share)
during 2000, of which $4.7 million related to the 1999
program, primarily the closure of Goodyear’s manufacturing
facility in Italy, and $119.4 million related to rationalization
actions announced during 2000. These 2000 actions were
for global workforce reductions and manufacturing facility
consolidations including the closure of a tire plant in Latin
America.

Pursuant to the program recorded in the fourth quarter of

2000 and the first quarter of 2001, Goodyear has released
approximately 6,800 associates to date, for which costs total-
ing $122.8 million were incurred during 2001. The balance
of the provision for associate-related costs totaled $5.9 mil-
lion and $73.2 million as of December 31, 2001 and 2000,
respectively. Rationalization costs, other than associate-
related costs, totaling $12.3 million were incurred during
2001. These costs were primarily for ongoing lease obliga-
tions. The balance of the provision for rationalization costs,
other than associate-related costs, totaled $3.4 million and
$8.8 million at December 31, 2001 and 2000, respectively.

Goodyear will complete these rationalization actions
during the first quarter of 2002. Annual pretax savings of
approximately $260 million were expected when the first
quarter 2001/fourth quarter 2000 program was approved.
Goodyear estimates that operating costs were reduced by
approximately $155 million in 2001 as a result of these
actions.

1999 PROGRAM
During 1999, Goodyear committed to a number of rational-
ization actions to reduce costs and increase productivity and
efficiency. The actions consisted of worldwide associate
reductions, exit from the CART/IRL racing series, termina-
tion of tire production at the Gadsden, Alabama, facility
and manufacturing facilities in Latin America and Italy, and
downsizing and consolidation of tire manufacturing facilities
in North America, Europe and Latin America. A charge of
$240.1 million ($177.7 million after tax or $1.13 per share)
was recorded, of which $47.6 million related to non-cash
writeoffs and $192.5 million related to future cash outflows,
primarily for associate severance costs. The associate-related
charges of $171.6 million provided for the release of
approximately 5,000 associates worldwide. Non-associate-
related costs of $68.5 million were primarily for the writeoff
of equipment taken out of service and noncancellable con-
tracts at the closed manufacturing facilities.

Goodyear recorded reversals of, and adjustments to,
rationalization plans of $68.5 million ($45.2 million after
tax or $.29 per share) during 1999, including $51.5 million
related to charges which were originally recorded during
1999, primarily related to the decision to resume production
of certain passenger tire lines in a portion of the Gadsden
facility. The remaining $17.0 million related to reserves
from prior year plans which were no longer needed for their
originally intended purposes. The net charge to the
Consolidated Statement of Income totaled $171.6 million
($132.5 million after tax or $.84 per share) during 1999.

Related to the 1999 actions, Goodyear incurred costs of
$16.0 million during 2001, primarily for the release of 350
associates and final plant closing costs for the closed manu-
facturing facility in Italy. The remaining reserve for the
1999 programs was $.8 million and $4.3 million at
December 31, 2001 and 2000, respectively. Goodyear has
completed these actions with the exception of ongoing sev-
erance payments.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

DUNLOP INTEGRATION PROGRAM
The following rationalization actions have been recorded as
adjustments to the purchase price allocation in respect of
the acquired Dunlop businesses, and did not affect the
Consolidated Statement of Income.

Goodyear committed to certain rationalization actions
related to the Dunlop businesses for the purpose of optimiz-
ing market growth opportunities and maximizing cost effi-
ciencies. Goodyear recorded costs in 1999, 2000 and the
first quarter of 2001 totaling $72.8 million, substantially all
of which was for future cash outflows. Under these rational-
ization programs, associate-related costs for the release or
relocation of approximately 2,000 production, support,
technical, retail and administrative associates totaling $58.5
million were recorded, and rationalization costs, other than
associate-related costs, totaling $14.3 million were recorded
primarily for lease cancellations and future rental payments
under noncancellable leases. Through December 31, 2001,
costs totaling $61.0 million had been incurred and reversals
of $5.0 million had been recorded for reserves no longer
needed for their originally intended purposes. Goodyear has
completed the Dunlop integration program except for
ongoing associate severance payments and future rental
payments under noncancellable leases. A balance of $6.8
million remains at December 31, 2001, for these purposes.
For further information, refer to the note to the financial

statements No. 3, Rationalizations.

STRATEGIC ALLIANCE
On September 1, 1999, Goodyear commenced operations
under a global alliance with Sumitomo Rubber Industries
Ltd. (“Sumitomo”). Under the global alliance agreements,
Goodyear acquired 75%, and Sumitomo owned 25%, of
Goodyear Dunlop Tires Europe B.V., a Netherlands holding
company. Concurrently, the holding company acquired sub-
stantially all of Sumitomo’s tire businesses in Europe, includ-
ing eight tire manufacturing plants located in England,
France and Germany and sales and distribution operations
in 18 European countries, and most of Goodyear’s tire busi-
nesses in Europe. Excluded from the European joint venture
are Goodyear’s tire businesses in Poland (other than a sales
company), Slovenia and Turkey (as well as Morocco and
South Africa), Goodyear’s aircraft tire businesses, and
Goodyear’s textile, steel tire cord and tire mold manufactur-
ing plants, a technical center and related facilities located in
Luxembourg.

Goodyear also acquired 75%, and Sumitomo acquired

acquired 100% of the balance of Sumitomo’s Dunlop Tire
distribution and sales operations in the United States and
Canada. Goodyear also acquired a 25% (and Sumitomo
acquired a 75%) equity interest in each of two tire compa-
nies in Japan, one for the distribution and sale of Goodyear-
brand passenger and truck tires in the replacement market
in Japan and the other for the distribution and sale of
Goodyear-brand and Dunlop-brand tires to original equip-
ment manufacturers in Japan. Goodyear transferred certain
assets of its subsidiary located in Japan in exchange for such
equity interests and approximately $27 million in cash.

Goodyear also acquired a 51% (and Sumitomo acquired

a 49%) equity interest in a company that coordinates and
disseminates commercialized tire technology among
Goodyear, Sumitomo, the joint ventures and their respec-
tive affiliates, and an 80% (and Sumitomo acquired a 20%)
equity interest in a global purchasing company. The global
alliance Agreements also provided for the investment by
Goodyear and Sumitomo in the common stock of the other.
Goodyear accounted for the strategic alliance using the

purchase method. The cost of the acquired businesses
totaled approximately $1.24 billion, including the cash pay-
ment of $931.6 million and the fair value of 25% of the
Goodyear businesses contributed to the European joint ven-
ture, or $307 million. In addition, the Dunlop businesses
contributed to the joint venture companies by Sumitomo
included $130 million of debt. Approximately $367 million
of goodwill was recorded on the transaction which was
being amortized on a straight-line basis over 40 years.
Amortization was discontinued on January 1, 2002, as a
result of Goodyear’s adoption of Statement of Financial
Accounting Standards No. 142, “Goodwill and Other
Intangible Assets.” Goodyear recognized a gain of $149.7 mil-
lion ($143.7 million after tax or $.90 per share) on the
change of control of 25% of the businesses it contributed to
the European joint venture.

For further information, refer to the notes to the finan-

cial statements No. 3, Rationalizations and No. 8,
Investments.

THE EURO
On January 1, 2002, the Euro became the lawful currency of
each member state of the European Monetary Union.
Goodyear actively prepared for the conversion of all infor-
mation systems software to the Euro, which became the
functional currency of most of its European businesses. This
conversion did not have a material impact on results of
operations, financial position or liquidity of Goodyear’s
operations.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

UNCERTAINTIES, ACCOUNTING ESTIMATES
AND OTHER MATTERS
If reduced levels of original equipment demand continue as
anticipated, resulting lower levels of plant utilization would
increase unit costs, which costs may not be recovered in the
market. Increased labor costs are anticipated and Goodyear
could experience unexpected higher raw material and ener-
gy prices. These costs, if incurred, may not be recoverable
due to pricing pressures present in today’s highly competi-
tive market. Goodyear is unable to predict future currency
fluctuations. Sales and earnings in future periods are likely
to be unfavorably impacted if the U.S. dollar strengthens
versus various foreign currencies. A continuation of the
current economic downturn in the U.S. and Europe is likely
to unfavorably impact Goodyear’s sales and earnings in
future periods. Similarly, continued volatile economic con-
ditions in emerging markets could adversely affect sales and
earnings in future periods.

The ultimate liability of Goodyear in respect of the vari-
ous claims, lawsuits and other legal proceedings to which it
is a party cannot be estimated with certainty. Goodyear’s
accounting policy is to determine whether a liability should
be recorded and to estimate the amount of such liability,
based on the information available and using assumptions
and methods it has concluded are appropriate. As additional
information becomes available, Goodyear will reassess
its evaluation of the pending claims, lawsuits and other
proceedings.

Goodyear has established a liability in respect of the
approximately 63,000 asbestos claims pending at December
31, 2001, and an asset for expected recoveries under insur-
ance policies and coverage-in-place agreements with certain
primary insurance carriers. The claims relate to exposure to
asbestos in certain rubber coated products manufactured by
Goodyear in the past or in certain Goodyear facilities.
During 2001, Goodyear received approximately 18,000 new
claims and resolved approximately 9,500 asbestos claims.
The amount spent on asbestos litigation defense and claim
resolution during 2001 was approximately $15.5 million
(before recovery of insurance proceeds). Goodyear believes
it will recover a substantial portion of its liability from the
proceeds of existing insurance policies. Goodyear cannot
predict the number of future claims, the cost of disposing of
existing and future claims, or the future ability to recover
from insurance carriers.

Goodyear also has claims asserted in other legal pro-
ceedings to which it is currently a party. These proceedings
include, among other things, several class actions relating to
alleged breaches of warranty or product defects relating to
Goodyear Entran II hose used in certain home heating sys-
tems and certain of Goodyear’s Load Range D and E light
truck tires.

A jury in a civil action between the Company and
Heatway in Federal District Court in Cleveland, Ohio,
found that the Company did not breach the implied war-
ranty of merchantability in respect of Entran II hose sold to
Heatway for installation in radiant heating systems and that
the hose was fit for use in the systems and the court, on
February 4, 2000, dismissed all claims of Heatway regarding
the Entran II hose. On February 25, 2002, a jury in a civil
action in a Colorado State Court awarded the plaintiffs
damages for alleged defects in Goodyear Entran II hose
installed as part of Heatway radiant heating systems at five
homesites in the amount of $5.9 million, which is trebled
under the Colorado Consumer Protection Act, plus interest,
attorney’s fees and costs, for a total award of approximately
$20 million. The Company believes the verdict was based
on material errors of fact and law and will appeal.

Litigation is inherently uncertain and difficult to predict.

Due to these inherent uncertainties, it is possible that the
actual liability, if any, will differ from estimates. Based on its
understanding and evaluation of these claims, as well as
existing environmental claims, Goodyear believes these
matters are not likely to have a material effect on its consoli-
dated financial position in future periods, although unantici-
pated adverse results in these proceedings could have a
material impact on earnings and cash flow in any quarter or
for any year.

The terms and conditions of Goodyear’s global alliance

with Sumitomo as set forth in the Umbrella Agreement
between Goodyear and Sumitomo provide for certain
minority exit rights available to Sumitomo commencing in
September 2004. Sumitomo’s exit rights, in the unlikely
event of exercise, could require Goodyear to make a sub-
stantial payment to acquire Sumitomo’s interest in the
alliance.

Goodyear entered into an agreement with Pacific

Dunlop Ltd. (PDL) during 2001 relating to SPT. Under the
agreement, PDL has the right, during the period beginning
August of 2005 and ending one year later, to require
Goodyear to purchase PDL’s 50% interest in SPT at a for-
mula price based on the earnings of SPT. If PDL does not
exercise its right, Goodyear may require PDL to sell its
interest to Goodyear during the 180 days following the
expiration of PDL’s right at a price established using the
same formula.

In view of current conditions in the financial markets,

which are subject to change, and based on current esti-
mates, it is possible that, beginning in 2003, Goodyear may
be required to make substantial contributions to its domestic
pension plans in order to satisfy minimum funding require-
ments in future periods.

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O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 2001, Goodyear adopted Statement of
Financial Accounting Standards No. 133 (SFAS 133),
“Accounting for Derivative Instruments and Hedging
Activities” as amended and interpreted. SFAS 133 requires
all derivatives to be recognized as assets or liabilities and
measured at fair value. Changes in such fair value will
impact earnings to the extent of any ineffectiveness in
hedging relationships. The transition adjustment resulting
from the adoption of SFAS 133 increased Shareholders’
Equity by $5.4 million.

On January 1, 2001, Goodyear adopted Statement of

Financial Accounting Standards No. 140 (SFAS 140),
“Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities”. SFAS 140 requires that
after a transfer of financial assets, an entity recognize the
financial and servicing assets it controls and the liabilities it
has incurred, derecognize financial assets when control has
been surrendered, and derecognize liabilities when extin-
guished. A transfer of financial assets in which the transfer-
or surrenders control over those assets is accounted for as a
sale to the extent that consideration other than beneficial
interests in the transferred assets is received in exchange.
The adoption of SFAS 140 did not have a material impact
on Goodyear’s results of operations, financial position or
liquidity.

On January 1, 2002, Goodyear adopted Statement of

Financial Accounting Standards No. 142 (SFAS 142),
“Goodwill and Other Intangible Assets”. SFAS 142 addresses
the accounting for goodwill and other intangible assets and
specifies that, among other things, intangible assets with an
indefinite useful life and goodwill will no longer be amor-
tized. The standard requires goodwill and intangible assets
with an indefinite useful life to be annually tested for
impairment and written down to fair value if considered
impaired. Goodyear estimates that amortization expense in
2002 will be reduced by approximately $25 million to $30
million after tax ($.15 per share to $.17 per share) compared
to 2001, and does not anticipate any impairment write-
down as a result of the implementation of SFAS 142.

SEGMENT INFORMATION
Segment information reflects the strategic business units of
Goodyear, which are organized to meet customer require-
ments and global competition. The tire business is managed
on a regional basis. Engineered Products and Chemical
Products are managed on a global basis.

Results of operations in the tire and engineered products

business segments were measured based on net sales to
unaffiliated customers and EBIT. Results of operations of the
chemical business included transfers to other segments.
Segment EBIT is computed as follows: net sales less cost of
goods sold, less selling, administrative and general expense
(excluding corporate administrative expenses).

Segment EBIT was $366.7 million in 2001, $599.0 mil-
lion in 2000 and $544.6 million in 1999. Segment operating
margin (segment EBIT divided by segment sales) in 2001
was 2.5%, compared to 4.0% in 2000 and 3.9% in 1999.

Segment EBIT does not include the previously discussed
rationalization charges and gains on asset sales. For further
information, refer to the note to the financial statements
No. 20, Business Segments.

NORTH AMERICAN TIRE
North American Tire segment sales in 2001 were $7.15 bil-
lion, increasing .6% from $7.11 billion in 2000 and 7.6%
from $6.65 billion in 1999.

Unit sales in 2001 were 112.0 million, decreasing 3.4%

from 2000 and increasing 2.7% from 1999. Replacement
unit sales in 2001 increased .2% from 2000 and 10.9% from
1999. Original equipment volume in 2001 decreased 11.3%
from 2000 and 13.2% from 1999.

Sales in 2001 increased compared to 2000 due to the

favorable impact of a change in product mix to higher
priced tires, price increases in the replacement market and
units delivered in connection with the Ford Motor
Company (“Ford”) replacement program for certain light
truck tires of a competitor. Sales were adversely affected in
2001 by lower original equipment volume resulting from
production cutbacks by the manufacturers of automobiles
and commercial trucks which Goodyear supplies, and lower
volume in the replacement market during the fourth quarter,
as economic conditions deteriorated. During 2001,
Goodyear supplied approximately 5 million tire units with
an EBIT impact of approximately $95 million in connection
with the Ford replacement program.

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O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

Sales in 2000 increased from 1999 due to the acquisition
of the Dunlop businesses in the United States and Canada.
The Dunlop businesses contributed $755.0 million to sales
in 2000, compared to $252.3 million in 1999. Sales in the
last four months of 2000 benefited from the sale of approxi-
mately 3.0 million tires related to a replacement program
involving approximately 6.5 million of a competitor’s tires.
Sales reflected improved customer fill rates from 1999, but
revenues were adversely impacted by reduced tire shipments
resulting from production cutbacks by original equipment
customers in the auto and commercial truck industries. In
addition, price increases implemented earlier in 2000 met
with resistance in the marketplace and as a result negatively
impacted sales of commercial tires in North America.

North American Tire segment EBIT was $107.8 million
in 2001, compared to $260.7 million in 2000 and $26.3 mil-
lion in 1999. Operating margin in 2001 was 1.5%, com-
pared to 3.7% in 2000 and .4% in 1999.

EUROPEAN UNION TIRE
European Union Tire segment sales in 2001 were $3.13 bil-
lion, decreasing 2.2% from $3.20 billion in 2000 and
increasing 18.4% from $2.64 billion in 1999.

Unit sales in 2001 were 61.1 million, increasing 1.4%
from 2000 and 33.6% from 1999. Replacement unit sales in
2001 decreased 2.0% from 2000 and increased 26.1% from
1999. Original equipment volume in 2001 increased 9.5%
from 2000 and 53.1% from 1999.

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

During the fourth quarter of 2001, North American Tire

Sales in 2000 increased from 1999 due to the acquisition

recorded a charge of $30 million for a voluntary tire
replacement program covering certain tires in service on 15-
passenger vans and ambulances. These tires will be replaced
with tires of the latest design. It is estimated that approxi-
mately 200,000 of these tires are in service and will be
replaced.

EBIT in 2001 decreased from 2000 due to higher conver-

sion costs resulting from lower levels of plant utilization,
higher raw material costs, higher SAG costs, lower sales
volume and the charge for Goodyear’s tire replacement
program. EBIT was favorably impacted by price increases
in the replacement market, a shift in mix to higher margin
tires, the Ford replacement program and lower research and
development costs.

EBIT in 2000 increased from 1999 due to the acquisition

of the Dunlop businesses, lower SAG resulting from cost
reduction programs and the inclusion of nonrecurring costs
in EBIT in 1999. EBIT in 2000 also benefited from increased
consumer replacement shipments due to a competitor’s tire
recall program. EBIT was adversely affected in 2000 by sig-
nificantly higher energy costs, increased raw material and
labor costs and production cutbacks to better align invento-
ry with original equipment demand.

EBIT did not include net rationalization charges (credits)

totaling $31.6 million in 2001, $(.7) million in 2000 and
$71.5 million in 1999.

Revenues and EBIT in the North American Tire segment
may be adversely affected in future periods by the effects of
continued competitive pricing conditions, reduced demand
by original equipment customers, changes in product mix,
unanticipated increases in raw material and energy prices,
anticipated higher wage and benefit costs and general eco-
nomic conditions.

of the Dunlop businesses. The Dunlop businesses con-
tributed $1.50 billion to sales in 2000, compared to
$621.1 million in 1999. Revenues were adversely impacted
by the decrease in the value of the Euro versus the U.S.
dollar, competitive pricing, especially in England and
Germany, lower volume in some market segments and a
change in mix to lower priced tires. Goodyear estimates
that the effects of currency translation adversely affected
European Union Tire segment sales by approximately $300
million in 2000 compared to 1999.

European Union Tire segment EBIT was $57.2 million in

2001, decreasing 35.5% from $88.7 million in 2000 and
69.6% from $188.0 million in 1999. Segment operating
margin in 2001 was 1.8%, compared to 2.8% in 2000 and
7.1% in 1999.

EBIT decreased in 2001 from 2000 due to higher raw
material costs, a change in mix to lower margin original
equipment tires and currency translation. Goodyear esti-
mates that the effects of currency translation reduced oper-
ating income by approximately $5 million in 2001 com-
pared to 2000. EBIT was favorably impacted by higher sales
volume and lower SAG costs resulting from cost contain-
ment and rationalization programs.

EBIT in 2000 decreased from 1999 due to competitive
market conditions, manufacturing inefficiencies resulting
from the relocation of tire production from England to the
European continent and the closure of a tire plant in Italy,
and higher raw material and energy prices. In addition,
Goodyear estimates that the effects of currency translation
reduced operating income by approximately $20 million in
2000 compared to 1999. EBIT was favorably affected in
2000 by higher tire unit sales resulting from the acquisition
of the Dunlop businesses.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

EBIT did not include net rationalization charges totaling

EBIT in 2001 decreased from 2000 due to the economic

$81.5 million and gains on asset sales of $17.0 million in
2001, net rationalization charges totaling $23.3 million in
2000 and net rationalization charges totaling $2.8 million in
1999. A gain totaling $149.7 million resulting from the
change in control of 25% of Goodyear’s businesses con-
tributed to the European joint venture was also not included
in 1999 EBIT.

Revenues and EBIT in the European Union Tire segment
may be adversely affected in future periods by the effects of
currency translation if the U.S. dollar strengthens against
European currencies. Sales and EBIT in future periods may
be negatively impacted by continued competitive pricing
conditions, changes in mix, unanticipated increases in raw
material and energy prices and the general economic slow-
down in the region.

EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE
Eastern Europe, Africa and Middle East Tire (“Eastern
Europe Tire”) segment sales in 2001 were $703.1 million,
decreasing 11.3% from $793.0 million in 2000 and 13.5%
from $812.9 million in 1999.

Unit sales in 2001 were 14.0 million, decreasing 10.1%
from 2000 and 11.5% from 1999. Replacement unit sales in
2001 decreased 8.1% from 2000 and 11.5% from 1999.
Original equipment volume in 2001 decreased 17.2% from
2000 and 11.1% from 1999.

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

Revenues in 2000 decreased from 1999 due to a down-
turn in the replacement market and the effects of currency
translation, but benefited from generally improved pricing
in the region and a general improvement in the economic
conditions in Eastern Europe and South Africa. Goodyear
estimates that the effects of currency translation adversely
affected Eastern Europe Tire segment sales by approximately
$75 million in 2000 compared to 1999.

Eastern Europe Tire EBIT was $20.2 million in 2001,
decreasing 63.0% from $54.6 million in 2000 and 59.4%
from $49.8 million in 1999. Operating margin in 2001 was
2.9%, compared to 6.9% in 2000 and 6.1% in 1999.

crisis in Turkey, the effects of currency translation, lower
sales volume and the effect of production cutbacks to align
inventory levels with demand. EBIT was favorably impacted
by reduced SAG resulting from cost containment and
rationalization programs. Goodyear estimates that the
effects of currency translation reduced operating income by
approximately $25 million in 2001 compared to 2000.
EBIT in 2000 increased from 1999 due primarily to
increased factory utilization levels and improved market
conditions. EBIT in 2000 was adversely impacted by an
industry-wide strike in Turkey.

EBIT did not include net rationalization charges totaling
$11.2 million in 2001, $9.6 million in 2000 and $.3 million
in 1999.

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

LATIN AMERICAN TIRE
Latin American Tire segment sales in 2001 were $1.01 bil-
lion, decreasing 3.4% from $1.05 billion in 2000, but
increasing 6.8% from $948.1 million in 1999.

Unit sales in 2001 were 20.0 million, increasing 1.3%
from 2000 and 12.4% from 1999. Replacement unit sales in
2001 decreased 6.3% from 2000 and 1.4% from 1999.
Original equipment volume in 2001 increased 24.9% from
2000 and 67.6% from 1999.

Revenues in 2001 decreased compared to 2000 due to

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

Revenues in 2000 increased from 1999 due primarily to
higher tire unit sales, but were adversely affected by com-
petitive pricing pressures.

Latin American Tire segment EBIT was $89.8 million in

2001, increasing 28.7% from $69.8 million in 2000 and
32.6% from $67.7 million in 1999. Operating margin in
2001 was 8.9%, compared to 6.7% in 2000 and 7.1% in
1999.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

EBIT in 2001 reflected price adjustments partially offset-

ting currency movements, the benefits of cost reduction
programs, rationalizations, lower raw material costs and
higher volume. EBIT was adversely affected by currency
translation and a change in mix to lower margin original
equipment tires. Goodyear estimates that the effects of cur-
rency translation reduced operating income by approxi-
mately $35 million in 2001 compared to 2000.

EBIT in 2000 increased from 1999 due to higher tire unit
sales, but was adversely affected by continued pricing pres-
sures and higher raw material and labor costs.

EBIT did not include rationalization charges totaling $.2
million in 2001, rationalization charges totaling $65.7 mil-
lion and a $5.0 million gain on the sale of land at a manu-
facturing facility in Mexico in 2000 and rationalization
charges totaling $77.3 million in 1999.

Revenues and EBIT in future periods may be adversely
affected by the effects of continued competitive pricing con-
ditions, changes in mix, unanticipated increases in raw mate-
rial and energy prices, continued volatile economic condi-
tions, future adverse economic conditions in Mexico, Central
America and South America and currency translation.

ASIA TIRE
Asia Tire segment sales in 2001 were $493.9 million,
decreasing 5.9% from $524.6 million in 2000 and 16.7%
from $593.2 million in 1999.

Unit sales in 2001 were 12.2 million, increasing 3.1%
from 2000 and .9% from 1999. Replacement unit sales in
2001 were flat from 2000 and decreased 8.7% from 1999.
Original equipment volume in 2001 increased 12.3% from
2000 and 39.8% from 1999.

Revenues in 2001 decreased from 2000, reflecting the
adverse impacts of currency translation, softening demand
in some markets and competitive pricing pressures.
Goodyear estimates that currency translation reduced sales
by approximately $35 million in 2001 compared to 2000.

Revenues in 2000 decreased from 1999 due primarily to
the absence of the replacement tire business transferred to
Goodyear’s non-consolidated joint venture with Sumitomo
in Japan, which contributed revenues of approximately
$49.7 million in 1999. In addition, revenues were adversely
affected by competitive pricing, a less favorable product mix
and currency translation.

Asia Tire segment EBIT was $19.9 million in 2001,

increasing 11.2% from $17.9 million in 2000 but decreasing
23.5% from $26.0 million in 1999. Operating margin in 2001
was 4.0%, compared to 3.4% in 2000 and 4.4% in 1999.

EBIT in 2001 increased from 2000 as the adverse effects
of currency translation and price competition were offset by
lower conversion costs as a result of cost containment pro-
grams, higher volume and lower raw material costs.

EBIT in 2000 decreased from 1999 due primarily to
lower tire unit sales, competitive pricing conditions driven
in part by increased low cost imports into the region and a
shift in mix to lower margin tires, higher raw material and
energy costs and price competition.

EBIT did not include rationalization charges totaling
$45.4 million in 2001, $3.3 million in 2000 and $1.5 million
in 1999.

Revenues and EBIT in future periods may be adversely
impacted by the effects of continued competitive pricing
conditions, changes in mix, unanticipated increases in raw
material and energy costs and currency translation.

Sales and EBIT of the Asia Tire segment do not include

South Pacific Tyres Ltd. (SPT), a tire manufacturer in
Australia and New Zealand, which is 50% owned by
Goodyear. Results of operations of SPT are not reported in
segment results and are reflected in Goodyear’s
Consolidated Statement of Income using the equity
method.

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

(IN MILLIONS)
Net Sales:

Asia Tire Segment
SPT

EBIT:

Asia Tire Segment
SPT

2001
2001

2000
1999
2000 1999

$493.9
481.3
$975.2

$ 524.6
563.6
$1,088.2

$ 593.2
674.5
$1,267.7

$ 19.9
(25.4)

$ 17.9
(11.1)
$ (5.5) $ 6.8

$ 26.0
31.2
$ 57.2

SPT sales in 2001 were $481.3 million, decreasing 14.6%
from $563.6 million in 2000 and 28.6% from $674.5 million
in 1999. Revenues in 2001 decreased from 2000 due to cur-
rency translation and competitive low cost imports aided by
continued import tariff reductions in Australia. Revenues in
2000 decreased from 1999 due to competitive pressures from
low cost imported tires and effects of currency translation.

SPT EBIT was a loss of $25.4 million in 2001, compared

to a loss of $11.1 million in 2000 and income of $31.2
million in 1999. EBIT in 2001 decreased from 2000 due to
excess production capacity and the weakened Australian
dollar versus the U.S. dollar. EBIT in 2000 decreased from
1999 due to production inefficiencies and higher raw
material costs.

SPT EBIT did not include rationalization charges of
approximately $48.0 million in 2001 and $32.2 million in
2000.

SPT debt totaled $67.4 million and $158.1 million at

December 31, 2001 and 2000, respectively.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

ENGINEERED PRODUCTS
Engineered Products segment sales in 2001 were $1.12 bil-
lion, decreasing 4.4% from $1.17 billion in 2000 and 9.1%
from $1.23 billion in 1999.

Revenues in 2001 decreased from 2000 due to unit sales

decreases resulting from lower product demand from the
automotive and transportation industries. Revenues were
favorably impacted by increases in the conveyor belt and
replacement products markets.

Revenues in 2000 decreased from 1999 due primarily to

Goodyear’s exit from the interior trim business in 1999,
which contributed revenues of approximately $71.0 million
in that year. In addition, revenues were adversely affected
by reduced demand for conveyor belting for the mining and
agriculture industries and reduced demand for hose and
power transmission products in the North American
replacement market.

Engineered Products segment EBIT in 2001 was $11.6
million, decreasing 73.1% from $43.1 million in 2000 and
83.5% from $70.4 million in 1999. Operating margin in
2001 was 1.0%, compared to 3.7% in 2000 and 5.7% in
1999.

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

EBIT in 2000 decreased from 1999 due primarily to
reduced demand, reduced capacity utilization, higher raw
material costs and competitive pricing.

EBIT did not include net rationalization charges of $1.5

million in 2001, $3.8 million in 2000 and $8.8 million in
1999.

Revenues and EBIT in the Engineered Products segment
may be adversely affected in future periods by lower origi-
nal equipment demand, competitive pricing pressures,
expected continuing unfavorable economic conditions in
certain markets, adverse economic conditions globally in
the mining, construction and agriculture industries, unantici-
pated increases in raw material and energy prices, anticipat-
ed higher wage and benefit costs and currency translation.

CHEMICAL PRODUCTS
Chemical Products segment sales in 2001 were $1.04 bil-
lion, decreasing 8.2% from $1.13 billion in 2000 but
increasing 9.2% from $949.8 million in 1999.
Approximately 50% of Chemical Products sales are to
Goodyear’s other segments.

Revenues in 2001 decreased from 2000 due to lower vol-

ume resulting from the slowdown in the tire industry.
Revenues in 2000 increased from 1999 due primarily to
price increases and higher sales volume.

Chemical Products segment EBIT in 2001 was $60.2 mil-

lion, decreasing 6.2% from $64.2 million in 2000 and
48.3% from $116.4 million in 1999. Operating margin in
2001 was 5.8%, compared to 5.7% in 2000 and 12.3% in
1999.

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

EBIT in 2000 decreased from 1999 due primarily to
increased raw material and energy prices and the inability to
recover cost increases due to the competitive pricing envi-
ronment.

EBIT did not include gains on asset sales of $27.4 million

in 2001 and $17.0 million in 1999. EBIT did not include
rationalization charges of $2.5 million in 1999.

Goodyear sold its specialty chemical business in France

and certain specialty chemical U.S. assets in the fourth
quarter of 2001. The specialty chemical business generated
sales of approximately $130 million in 2001.

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

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES
Net cash provided by operating activities was $1.27 billion
during 2001, as reported on the Consolidated Statement of
Cash Flows. Working capital requirements decreased during
the period as Goodyear implemented inventory reduction
programs, reduced levels of gross receivables and increased
its sales of trade accounts receivable.

During the second quarter of 2001, Goodyear terminat-
ed its $550 million domestic accounts receivable continuous
sale program and entered into a new program. The new
program involves the continuous sale of substantially all of
Goodyear’s domestic trade accounts receivable to Wingfoot
A/R LLC, a wholly-owned limited liability subsidiary com-
pany that is a bankruptcy-remote special purpose entity.
The results of operations and financial position of Wingfoot
A/R LLC are not included in the consolidated financial
statements of Goodyear as provided by SFAS 140.
Wingfoot A/R LLC purchases Goodyear’s receivables with
(a) the cash proceeds of borrowings from a group of five
bank-affiliated issuers of commercial paper, which borrow-
ings are secured by the trade accounts receivable purchased
from Goodyear ($580.0 million at December 31, 2001), (b)
the cash proceeds of the Company’s $98.2 million equity
investment in Wingfoot A/R LLC and (c) a subordinated
note payable to the Company in the amount of $385.2
million at December 31, 2001, which is equal to the total
amount of trade receivables purchased by Wingfoot A/R
LLC minus the sum of the equity of the Wingfoot A/R LLC
and the cash proceeds from the sale of the notes issued by
Wingfoot A/R LLC to the five lenders, and minus a dis-
count. Goodyear retained responsibility for servicing the
receivables. As the receivables are collected, the cash pro-
ceeds are used to purchase additional receivables. Goodyear
pays fees under the program based on certain variable mar-
ket interest rates and other agreed amounts. These fees
are reported as Other (Income) and Expense. Wingfoot A/R
LLC may borrow up to $825 million from the bank-
affiliated note purchasers. The amount that may be bor-
rowed from time to time by Wingfoot A/R LLC depends
on, among other things, the total uncollected balance of
receivables owned by it. The borrowings are available to
Wingfoot A/R LLC until February 2003, unless extended
by the lenders for additional one-year periods.

Various international subsidiaries of Goodyear have also

established accounts receivable continuous sales programs
whereunder these subsidiaries may receive proceeds from
the sale of certain of their receivables to affiliates of certain
banks. These subsidiaries retained servicing responsibilities.
At December 31, 2001, the value in U.S. dollars of which
these international subsidiaries may borrow is approximately

$150 million. In addition, various other international sub-
sidiaries of Goodyear sold certain of their trade receivables
during 2001 and 2000.

At December 31, 2001, the net proceeds for all sales of

receivables by Goodyear were $851.8 million. Net cash
inflows of $249.1 million were received in 2001 from trans-
fers of accounts receivable under these and other programs.
For further information, refer to the note to the financial
statements No. 5, Accounts and Notes Receivable.

INVESTING ACTIVITIES
Net cash used in investing activities was $447.4 million dur-
ing 2001. Capital expenditures in 2001 were $435.4 million,
of which $197.6 million was used on projects to increase
capacity and improve productivity and $237.8 million was
used for tire molds and various other projects. Capital expen-
ditures are expected to approximate $500 million in 2002.

(IN MILLIONS)
Capital expenditures
Depreciation
Amortization

2001
$435.4
596.4
40.3

2000
$614.5
593.6
36.7

1999
$805.0
557.6
24.1

Depreciation and amortization are expected to be in the
range of $550 million to $650 million in 2002.

Investing activities in 2001 included the sale of land and
buildings in the United Kingdom and Goodyear’s specialty
chemical business.

Investing activities in 2000 included the sale of leasehold

interests in, and the sale and leaseback of, various distribu-
tion facilities in the United States. Goodyear also acquired a
majority ownership interest in a retreading production and
distribution operation in the United States.

Investing activities in 1999 included a cash payment of

$931.6 million for the acquisition of majority interests in
the Dunlop Tire businesses in Europe and North America.
The asset acquisition amount of $892.0 million reflected on
Goodyear’s Consolidated Statement of Cash Flows is
net of cash received. Other investing activities in 1999
included the net proceeds of $27 million from the sale of
assets to the Japanese joint ventures formed under the
strategic alliance, which are 25% owned by Goodyear, and
the $17 million of proceeds from the sale of customer lists
and formulations in connection with Goodyear’s exit from
the production of certain rubber chemicals.

At December 31, 2001, Goodyear had binding commit-
ments for investments in land, buildings and equipment of
$121.5 million and off-balance sheet financial guarantees
written and other commitments totaling $151.4 million.
For further information on investing activities, refer to

the notes to the financial statements No. 2, Strategic
Alliance and No. 8, Investments.

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

FINANCING ACTIVITIES
Net cash used in financing activities was $103.0 million dur-
ing 2001.

(DOLLARS IN MILLIONS)
Consolidated Debt
Debt to Debt and Equity

2001

2000
$3,568.3 $3,585.8
50.6%

55.5%

1999
$3,424.5
47.4%

Consolidated Debt as stated above at December 31, 2000
and 1999 does not include the 1.2% Convertible Notes
issued to Sumitomo ($56.9 million outstanding at December
31, 2000 and $127.8 million outstanding at December 31,
1999) which have been converted into 2,278,896 shares of
the Common Stock of the Company.

On March 30, 2001, the Company borrowed $800 mil-

lion for a period of three years under a bank term loan
agreement with 28 domestic and international banks. The
term loan is due on March 30, 2004. The Company may
prepay the loan without penalty at the end of any interest
period. The loan bears interest at a floating rate at a spread
over LIBOR for interest periods of 1,2,3,6 or 12 months, as
selected by the Company. Proceeds from the borrowing
were used to repay short term debt.

The Company issued $650 million of its 7.857% Notes
due 2011 in the third quarter of 2001. A portion of the pro-
ceeds from the issuance of the Notes was used to repay out-
standing commercial paper and short term bank borrowings.
The remaining portion was retained for general corporate
purposes.

During the third quarter of 2001, the Company issued
4.3 million shares of its common stock with a market value
of approximately $100.0 million as a contribution to certain
domestic pension plans.

During the fourth quarter of 2001, the Board of
Directors of the Company declared a regular quarterly
dividend of $.12 per share, a reduction of $.18 per share
from the $.30 per share declared and paid in each quarter
of 2000 and the first three quarters of 2001. The Board’s
decision to reduce the dividend was in response to current
economic and business conditions and Goodyear’s
operating results.

On February 6, 2001, Sumitomo converted the

Company’s 1.2% Convertible Note Due August 16, 2001 in
the principal amount of ¥6,536,535,767 into 1,140,866
shares of the Common Stock of the Company.

CREDIT SOURCES
Substantial short term and long term credit sources are
available to Goodyear globally under normal commercial
practices. In total, Goodyear had credit arrangements of
$6.1 billion available at December 31, 2001, of which $2.6
billion were unused. At December 31, 2001, Goodyear had
short term committed and uncommitted bank credit
arrangements totaling $1.3 billion, of which $1.1 billion
were unused. Goodyear also had available long term credit
arrangements at December 31, 2001 totaling $4.8 billion, of
which $1.5 billion were unused.

The Company is a party to two revolving credit facility
agreements, consisting of a $750 million five-year revolving
credit facility and a $775 million 364-day revolving credit
facility.

The $750 million five-year credit facility agreement is
with 26 domestic and international banks and provides that
the Company may borrow at any time until August 15,
2005, when the commitment terminates and any outstand-
ing loans mature. The Company pays a commitment fee
ranging from 12.5 to 25 basis points on the entire amount
of the commitment (whether or not borrowed) and a usage
fee on amounts borrowed (other than on a competitive bid
or prime rate basis) ranging from 37.5 to 125 basis points
over LIBOR (or 50 to 137.5 basis points over a defined CD
rate). These fees may fluctuate quarterly within these ranges
based upon Goodyear’s leverage. During 2001, commitment
fees averaged 19.5 basis points.

The $775 million 364-day credit facility agreement is
with 26 domestic and international banks and provides that
the Company may borrow until August 13, 2002, on which
date the facility commitment terminates, except as it may be
extended on a bank by bank basis. If a bank does not extend
its commitment if requested to do so, the Company may
obtain from such bank a two year term loan up to the
amount of such bank’s commitment. The Company pays a
commitment fee ranging from 10 to 20 basis points on the
entire amount of the commitment (whether or not bor-
rowed) and a usage fee on amounts borrowed (other than
on a competitive bid or prime rate basis) ranging from 40 to
130 basis points over LIBOR (or 52.5 to 142.5 basis points
over a defined CD rate). These fees may fluctuate quarterly
within these ranges based upon Goodyear’s leverage. During
2001, commitment fees averaged 14.6 basis points.

G O O D Y E A R 2 0 0 1

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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

Each of the bank credit facilities provides that the
Company may obtain loans bearing interest at reserve
adjusted LIBOR or a defined certificate of deposit rate, plus
in each case the applicable usage fee, at rates based on the
prime rate, or at rates determined on a competitive bid
basis. Under each of the facility agreements, a utilization fee
of 25 basis points per annum is charged each day on which
the sum of the outstanding loans exceeds 50% of the total
commitment. No utilization fees were paid during 2001.
Each facility agreement contains certain covenants which,
among other things, require Goodyear to maintain at the
end of each fiscal quarter a minimum consolidated net
worth and a defined minimum interest coverage ratio. In
addition, the facility agreements establish a limit on the
aggregate amount of consolidated debt the Company and
its subsidiaries may incur. There were no borrowings out-
standing under these agreements at December 31, 2001.
These revolving credit facilities support, among other
things, the uncommitted short term bank facilities. The
Company amended each of these bank credit facility agree-
ments and certain other agreements with banks during 2001
to modify the interest coverage ratio and consolidated net
worth covenants and certain other provisions to reflect cur-
rent operating conditions.

Standard & Poors’ and Fitch have reduced their ratings of

the Company’s short term and long term debt to B/BB+,
which are below investment grade. Although the
Company’s debt is rated P-3/Baa3 by Moody’s Investor
Services, the Company has been advised by Moody’s that
the Company’s ratings are under review for a possible future
reduction to a rating below investment grade. As a result of
these ratings actions, Goodyear will not be able to partici-
pate in certain capital markets and is likely to experience
increases in the cost of obtaining capital in other markets.
In addition, financing and related expenses under some
existing arrangements have increased.

For further information on financing activities, refer to

the note to the financial statements No. 11, Financing
Arrangements and Derivative Financial Instruments.

Funds generated by operations, together with funds
available under existing credit arrangements, are expected to
be sufficient to meet Goodyear’s currently anticipated
requirements.

QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK
Goodyear actively manages its fixed and floating rate debt
mix, within defined limitations, using refinancings and
unleveraged interest rate swaps. Goodyear will enter into
fixed and floating interest rate swaps to hedge against the
effects of adverse changes in interest rates on consolidated
results of operations and future cash outflows for interest.
Fixed rate swaps are used to reduce Goodyear’s risk of
increased interest costs during periods of rising interest
rates, and are normally designated as cash flow hedges.
Floating rate swaps are used to convert the fixed rates of
long term borrowings into short term variable rates, and are
normally designated as fair value hedges. Interest rate swap
contracts are thus used by Goodyear to separate interest
rate risk management from the debt funding decision. At
December 31, 2001, the interest rate on 75% of Goodyear’s
debt was fixed by either the nature of the obligation or
through the interest rate contracts, compared to 54% at
December 31, 2000. Interest rate lock contracts are used to
hedge the risk-free rate component of anticipated long term
debt issuances. No interest rate lock contracts were out-
standing at December 31, 2001 or 2000.

The following tables present information at December 31:

(IN MILLIONS)

2001

2000

INTEREST RATE EXCHANGE CONTRACTS
Fair value — (unfavorable)
Carrying amount:

Long term asset
Current (liability)
Long term (liability)

Pro forma fair value — (unfavorable)

$(9.2)

$ —

.2
(8.3)
(1.1)
(10.6)

—
(.2)
—
(.2)

The pro forma information assumes a 10% decrease in vari-
able market interest rates at December 31 of each year, and
reflects the estimated fair value of contracts outstanding at
that date under that assumption.

(IN MILLIONS)

2001

2000

FIXED RATE DEBT
Fair value
Carrying amount
Pro forma fair value

$2,359.0
2,353.3
2,458.3

$1,731.0
1,776.5
1,801.3

G O O D Y E A R 2 0 0 1

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(CONTINUED)

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S

FORWARD-LOOKING INFORMATION –
SAFE HARBOR STATEMENT
Certain information set forth herein (other than historical
data and information) may constitute forward-looking state-
ments regarding events and trends that may affect
Goodyear’s future operating results and financial position.
The words “estimate,” “expect,” “intend” and “project,” as
well as other words or expressions of similar meaning, are
intended to identify forward-looking statements. Readers
are cautioned not to place undue reliance on forward-look-
ing statements, which speak only as of the date of this
annual report. Such statements are based on current expec-
tations, are inherently uncertain, are subject to risks and
should be viewed with caution. Actual results and experi-
ence may differ materially from the forward-looking state-
ments as a result of many factors, including: changes in gen-
eral economic and industry conditions in the various mar-
kets served by Goodyear’s operations; price and product
competition; increased competitive activity; changes in
demand levels for our products; fluctuations in the prices
paid for raw materials and energy; our ability to control
costs and expenses; changes in the monetary policies of var-
ious countries where Goodyear has significant operations;
changes in interest and currency exchange rates; and other
unanticipated events and conditions. It is not possible to
foresee or identify all such factors. Goodyear will not revise
or update any forward-looking statement, or disclose any
facts, events or circumstances that occur after the date here-
of which may affect the accuracy of any forward-looking
statement.

The pro forma information assumes a 100 basis point
decrease in market interest rates at December 31 of each
year, and reflects the estimated fair value of fixed rate debt
outstanding at that date under that assumption.

The sensitivity to changes in interest rates of Goodyear’s

interest rate contracts and fixed rate debt was determined
with a valuation model based upon net modified duration
analysis. The model assumes a parallel shift in the yield
curve, and the precision of the model decreases as the
assumed change in interest rates increases.

FOREIGN CURRENCY EXCHANGE RISK
In order to reduce the impact of changes in foreign
exchange rates on consolidated results of operations and
future foreign currency denominated cash flows, Goodyear
was a party to various foreign currency forward exchange
contracts at December 31, 2001 and 2000. These contracts
reduce exposure to currency movements affecting existing
foreign currency denominated assets, liabilities and firm
commitments resulting primarily from trade receivables and
payables, equipment acquisitions, intercompany loans and
Goodyear’s foreign currency-denominated borrowings in
the U.S. The contract maturities match the maturities of the
currency positions. Changes in the fair value of forward
exchange contracts are substantially offset by changes in the
fair value of the hedged positions.

The following table presents information at December 31:

(IN MILLIONS)
Fair value — favorable (unfavorable)
Carrying amount — asset (liability)
Pro forma change in fair value — favorable

2001
$(13.0)
(13.6)
44.6

2000
$24.0
23.0
33.3

The pro forma information assumes a 10% change in for-
eign exchange rates at December 31 of each year, and
reflects the estimated change in the fair value of contracts
outstanding at that date under that assumption.

The sensitivity to changes in exchange rates of

Goodyear’s foreign currency positions was determined using
current market pricing models.

For further information on interest rate contracts and
foreign currency exchange contracts, refer to the note to
the financial statements No. 11, Financing Arrangements
and Derivative Financial Instruments.

G O O D Y E A R 2 0 0 1

– 31 –

C O N S O L I D A T E D S T A T E M E N T O F I N C O M E

(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31,

2001

2000

1999

NET SALES

$14,147.2

$14,417.1

$13,355.4

Cost of Goods Sold
Selling, Administrative and General Expense
Rationalizations (Note 3)
Interest Expense (Note 17)
Other (Income) and Expense (Note 4)
Foreign Currency Exchange
Equity in Earnings of Affiliates
Minority Interest in Net Income of Subsidiaries

Income (Loss) before Income Taxes
United States and Foreign Taxes on Income (Loss) (Note 16)

11,619.5
2,248.8
206.8
292.4
11.8
.1
40.6
.2

(273.0)
(69.4)

11,637.3
2,237.3
124.1
282.6
27.8
(6.7)
22.4
33.5

58.8
18.5

10,832.3
2,016.7
171.6
179.4
(147.1)
(27.6)
(10.3)
40.3

300.1
56.9

NET INCOME (LOSS)

$ (203.6)

$ 40.3

$ 243.2

NET INCOME (LOSS) PER SHARE — BASIC

$ (1.27)

$ .26

$ 1.55

Average Shares Outstanding (Note 12)

159,955,869

156,840,646

156,182,004

NET INCOME (LOSS) PER SHARE — DILUTED

$ (1.27)

$ .25

$ 1.53

Average Shares Outstanding (Note 12)

159,955,869

158,764,926

158,939,599

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

G O O D Y E A R 2 0 0 1

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C O N S O L I D A T E D B A L A N C E S H E E T

(DOLLARS IN MILLIONS)
DECEMBER 31,

ASSETS
Current Assets:

Cash and cash equivalents
Accounts and notes receivable (Note 5)
Inventories (Note 6)
Prepaid expenses and other current assets

Total Current Assets

Long Term Accounts and Notes Receivable
Investments in Affiliates, at equity
Other Assets (Note 8)
Goodwill (Note 7)
Deferred Income Tax
Deferred Charges
Properties and Plants (Note 9)

Total Assets

LIABILITIES
Current Liabilities:

Accounts payable-trade
Compensation and benefits (Notes 14, 15)
Other current liabilities
United States and foreign taxes
Notes payable to banks (Note 11)
Sumitomo 1.2% Convertible Note Payable Due 8/01 (Note 8)
Long term debt due within one year (Note 11)

Total Current Liabilities

Long Term Debt (Note 11)
Compensation and Benefits (Notes 14, 15)
Other Long Term Liabilities
Minority Equity in Subsidiaries

Total Liabilities

SHAREHOLDERS’ EQUITY
Preferred Stock, no par value:

Authorized, 50,000,000 shares, unissued

Common Stock, no par value:

Authorized, 300,000,000 shares
Outstanding shares, 163,165,698 (157,603,962 in 2000)

Capital Surplus
Retained Earnings
Accumulated Other Comprehensive Income (Note 21)

Total Shareholders’ Equity

2001

2000

$ 959.4
1,486.8
2,380.9
427.9
5,255.0

143.8
82.7
263.0
569.1
674.9
1,408.3
5,116.1
$13,512.9

$ 1,359.2
897.2
396.1
309.3
255.0
—
109.7
3,326.5

3,203.6
2,848.9
482.3
787.6
10,648.9

$ 252.9
2,074.7
2,879.7
259.9
5,467.2

92.8
102.0
183.8
588.4
394.1
1,218.7
5,521.0
$13,568.0

$ 1,505.2
823.6
395.6
208.4
1,077.0
56.9
159.2
4,225.9

2,349.6
2,310.5
334.1
844.9
10,065.0

—

163.2
1,245.4
3,192.7
(1,737.3)
2,864.0

157.6
1,092.4
3,558.8
(1,305.8)
3,503.0

Total Liabilities and Shareholders’ Equity

$13,512.9

$13,568.0

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

G O O D Y E A R 2 0 0 1

– 33 –

C O N S O L I D A T E D S T A T E M E N T O F S H A R E H O L D E R S ’ E Q U I T Y

(DOLLARS IN MILLIONS, EXCEPT PER SHARE)

COMMON STOCK

AMOUNT

CAPITAL
SURPLUS

RETAINED
EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME

TOTAL
SHAREHOLDERS’
EQUITY

BALANCE AT DECEMBER 31, 1998

155,943,535

$155.9

$1,015.9

$3,651.2

$ (903.8)

$3,919.2

243.2

(187.5)

(212.2)

17.6
11.0
(12.8)

46.8
(187.5)

14.1

391,585

13.7

156,335,120

156.3

1,029.6

3,706.9

(1,100.2)

3,792.6

Conversion of 1.2% Convertible Note Payable
Stock compensation plans

1,138,030
130,812

1.1
.2

58.8
4.0

157,603,962

157.6

1,092.4

3,558.8

(1,305.8)

3,503.0

(after deducting 39,735,133 treasury shares)

Comprehensive income:

Net income
Foreign currency translation

Less reclassification adjustment for amounts

recognized in income

Minimum pension liability (net of tax of $6.3)
Unrealized investment loss (net of tax of $7.8)

Total comprehensive income
Cash dividends — $1.20 per share
Common stock issued from treasury:

Stock compensation plans

BALANCE AT DECEMBER 31, 1999

(after deducting 39,343,548 treasury shares)

Comprehensive income:

Net income
Foreign currency translation
Minimum pension liability (net of tax of $4.1)
Unrealized investment gain (net of tax of $1.7)

Total comprehensive income (loss)

Cash dividends - $1.20 per share
Common stock issued from treasury:

BALANCE AT DECEMBER 31, 2000

(after deducting 38,074,706 treasury shares)

Comprehensive income:
Net income (loss)
Foreign currency translation

Less reclassification adjustment for amounts

recognized in income

Minimum pension liability (net of tax of $124.4)
Unrealized investment loss (net of tax of $4.1)
Transition adjustment from adoption of SFAS 133
Deferred derivative loss (net of tax of $17.1)

Less reclassification adjustment for amounts
recognized in income (net of tax of $5.7)

Total comprehensive income (loss)

Cash dividends — $1.02 per share
Common stock issued from treasury:

40.3

(188.4)

(201.7)
(6.7)
2.8

(165.3)
(188.4)

59.9
4.2

(203.6)

(162.5)

(183.5)

7.2
(235.4)
(6.6)
5.4
(27.8)

9.2

(635.1)
(162.5)

100.0
56.2
2.4

Domestic pension funding
Conversion of 1.2% Convertible Note Payable
Stock compensation plans

4,300,000
1,140,866
120,870

4.3
1.1
.2

95.7
55.1
2.2

BALANCE AT DECEMBER 31, 2001

163,165,698

$163.2

$1,245.4

$3,192.7

$(1,737.3)

$2,864.0

(after deducting 32,512,970 treasury shares)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

G O O D Y E A R 2 0 0 1

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C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S

(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss)
Adjustments to reconcile net income (loss) to cash

flows from operating activities:

Depreciation and amortization
Deferred tax provision (Note 16)
Rationalizations (Note 3)
Asset sales (Note 4)

Proceeds from sale of accounts receivable (Note 5)
Changes in operating assets and liabilities, net

of acquisitions and dispositions:
Accounts and notes receivable
Inventories
Accounts payable — trade
Domestic pension funding (Note 8)
Other assets and liabilities
Total adjustments

Total cash flows from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures
Short term securities acquired
Short term securities redeemed
Asset dispositions
Asset acquisitions (Notes 2, 8)
Other transactions

Total cash flows from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Short term debt incurred
Short term debt paid
Long term debt incurred
Long term debt paid
Common stock issued (Notes 8, 12)
Joint venture dividends paid to Sumitomo
Dividends paid to Goodyear shareholders

Total cash flows from financing activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents

NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of the Period
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

2001

2000

1999

$ (203.6)

$ 40.3

$ 243.2

636.7
(252.0)
158.3
(30.8)
249.1

214.6
407.8
(101.8)
—
188.2
1,470.1

1,266.5

(435.4)
(2.3)
1.9
118.2
—
(129.8)
(447.4)

83.8
(1,365.1)
1,510.2
(158.0)
1.7
(13.1)
(162.5)
(103.0)

(9.6)

706.5
252.9
$ 959.4

630.3
(138.9)
100.1
(3.2)
38.6

97.4
(382.6)
139.9
(5.3)
(6.8)
469.5

509.8

(614.5)
(24.4)
26.1
172.6
—
(28.2)
(468.4)

1,199.2
(1,908.2)
1,145.9
(229.2)
4.2
(27.1)
(188.4)
(3.6)

(26.2)

11.6
241.3
$ 252.9

581.7
(141.0)
132.5
(154.8)
(16.0)

29.4
273.4
(83.4)
(47.3)
(183.0)
391.5

634.7

(805.0)
(54.2)
59.5
49.5
(892.0)
(159.8)
(1,802.0)

2,111.8
(727.1)
20.5
(48.7)
14.1
—
(187.5)
1,183.1

(13.5)

2.3
239.0
$ 241.3

G O O D Y E A R 2 0 0 1

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 1

ACCOUNTING POLICIES
A summary of the significant accounting policies used in the
preparation of the accompanying financial statements follows:

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of all majority-owned subsidiaries in which no substantive
participating rights are held by minority shareholders. All
intercompany transactions have been eliminated.

Goodyear’s investments in majority-owned subsidiaries in

which substantive participating rights are held by minority
shareholders and in 20% to 50% owned companies in
which it has the ability to exercise significant influence over
operating and financial policies are accounted for using the
equity method. Accordingly, Goodyear’s share of the earn-
ings of these companies is included in consolidated net
income. Investments in other companies are carried at cost.

REVENUE RECOGNITION
Revenues are recognized when finished products are
shipped to unaffiliated customers and both title and the
risks and rewards of ownership are transferred, or services
have been rendered and accepted. Appropriate provision is
made for uncollectible accounts.

SHIPPING AND HANDLING FEES AND COSTS
Expenses for transportation of products to customers is
recorded as a component of cost of goods sold.

CONSOLIDATED STATEMENT OF CASH FLOWS
Cash and cash equivalents include cash on hand and in the
bank as well as all short term securities held for the primary
purpose of general liquidity. Such securities normally mature
within three months from the date of acquisition. Cash
flows associated with items intended as hedges of identifi-
able transactions or events are classified in the same
category as the cash flows from the items being hedged.

INVENTORY PRICING
Worldwide inventories are stated at the lower of cost or
market. Cost is determined using FIFO or the average cost
method. Refer to Note 6.

INVESTMENTS
Investments in marketable equity securities are stated at fair
value. Fair value is determined using quoted market prices at
the end of the reporting period and, when appropriate,
exchange rates at that date. Unrealized gains and losses on
marketable equity securities classified as available-for-sale
are recorded in Accumulated Other Comprehensive
Income, net of tax. Refer to Notes 8 and 21.

GOODWILL
Goodyear adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), “Goodwill and Other

Intangible Assets” effective January 1, 2002. The following
represents Goodyear’s policy in effect for the three year
period ending December 31, 2001. Goodwill is recorded
when the cost of acquired businesses exceeds the fair value
of the identifiable net assets acquired. Goodwill is amor-
tized over its estimated useful life, based on an evaluation of
all relevant factors. Substantially all goodwill resulting from
the strategic alliance with Sumitomo and other acquisitions
in North America and the European Union is amortized on
a straight-line basis over 40 years. Goodwill resulting from
acquisitions in emerging markets is amortized on a straight-
line basis over periods ranging from 20-40 years. The
carrying amount and estimated useful life of goodwill are
reviewed whenever events or changes in circumstances indi-
cate that revisions may be warranted. Refer to Note 7.

PROPERTIES AND PLANTS
Properties and plants are stated at cost. Depreciation is
computed using the straight-line method. Accelerated
depreciation is used for income tax purposes, where permit-
ted. Refer to Note 9.

STOCK-BASED COMPENSATION
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. Refer
to Note 12.

ADVERTISING COSTS
Costs incurred for producing and communicating advertis-
ing are generally expensed when incurred. Costs incurred
under Goodyear’s domestic cooperative advertising program
with dealers and franchisees are recorded as reductions of
sales subsequent to the first time the advertising takes place,
as related revenues are recognized. Refer to Note 19.

FOREIGN CURRENCY TRANSLATION
Financial statements of international subsidiaries are translat-
ed into U.S. dollars using the exchange rate at each balance
sheet date for assets and liabilities and a weighted-average
exchange rate for each period for revenues, expenses, gains
and losses. Where the local currency is the functional cur-
rency, translation adjustments are recorded as Accumulated
Other Comprehensive Income. Where the U.S. dollar is the
functional currency, translation adjustments are recorded
in income.

DERIVATIVE FINANCIAL INSTRUMENTS AND
HEDGING ACTIVITIES
Derivative financial instrument contracts and nonderivative
instruments are utilized by Goodyear to manage interest
rate and foreign exchange risks. Goodyear has established a

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

control environment that includes policies and procedures
for risk assessment and the approval, reporting and monitor-
ing of derivative financial instrument activities. Company
policy prohibits holding or issuing derivative financial
instruments for trading purposes.

To qualify for hedge accounting, hedging instruments
must be designated as hedges and meet defined correlation
and effectiveness criteria. These criteria require that the
anticipated cash flows and/or financial statement effects of
the hedging instrument substantially offset those of the
position being hedged.

Derivative contracts are reported at fair value on the
Consolidated Balance Sheet as both current and long term
Accounts Receivable or Other Liabilities. Deferred gains
and losses on contracts designated as cash flow hedges are
recorded in Accumulated Other Comprehensive Income
(OCI). Ineffectiveness in hedging relationships is recorded
as Other (Income) and Expense in the current period.

INTEREST RATE CONTRACTS - Gains and losses on contracts

designated as cash flow hedges are initially deferred and
recorded in OCI. Amounts are transferred from OCI and
recognized in income as Interest Expense in the same period
that the hedged item is recognized in income. Gains and
losses on contracts designated as fair value hedges are rec-
ognized in income in the current period as Interest Expense.
Gains and losses on contracts with no hedging designation
are recorded in income in the current period as Other
(Income) and Expense.

FOREIGN CURRENCY CONTRACTS - Gains and losses on con-

tracts designated as cash flow hedges are initially deferred
and recorded in OCI. Amounts are transferred from OCI
and recognized in income as Foreign Currency Exchange in
the same period that the hedged item is recognized in
income. Gains and losses on contracts with no hedging
designation are recorded in income currently as Foreign
Currency Exchange.

Goodyear does not include premiums paid on forward
currency contracts in its assessment of hedge effectiveness.
Premiums on contracts designated as hedges are recognized
in income as Foreign Currency Exchange over the life of
the contract.

NET INVESTMENT HEDGING - Nonderivative instruments
denominated in foreign currencies are used to hedge net
investments in foreign subsidiaries. Gains and losses on
these instruments are deferred and recorded in OCI as
Foreign Currency Translation Adjustment. These gains and
losses are only recognized in income upon the complete or
partial sale of the related investment or the complete liqui-
dation of the investment.

TERMINATION OF CONTRACTS - Deferred gains and losses
in OCI are recognized in income as Other (Income) and
Expense when contracts are terminated concurrently with
the termination of the hedged position. To the extent that

such position remains outstanding, deferred gains and losses
in OCI are amortized to Interest Expense or Foreign
Currency Exchange over the remaining life of that position.
Gains and losses on contracts that Goodyear temporarily
continues to hold after the early termination of a hedged
position, or that otherwise no longer qualify for hedge
accounting, are recognized in income as Other (Income)
and Expense.

Refer to Note 11.

ENVIRONMENTAL CLEANUP MATTERS
Goodyear expenses environmental expenditures related to
existing conditions resulting from past or current operations
and from which no current or future benefit is discernible.
Expenditures that extend the life of the related property or
mitigate or prevent future environmental contamination are
capitalized. Goodyear determines its liability on a site by
site basis and records a liability at the time when it is proba-
ble and can be reasonably estimated. Goodyear’s estimated
liability is reduced to reflect the anticipated participation of
other potentially responsible parties in those instances
where it is probable that such parties are legally responsible
and financially capable of paying their respective shares of
the relevant costs. The estimated liability of Goodyear is
not discounted or reduced for possible recoveries from
insurance carriers. Refer to Note 22.

INCOME TAXES
Income taxes are recognized during the year in which trans-
actions enter into the determination of financial statement
income, with deferred taxes being provided for temporary
differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured
by tax laws. Refer to Note 16.

USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires manage-
ment to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements
and related notes to financial statements. Changes in such
estimates may affect amounts reported in future periods.

RECLASSIFICATION
Certain items previously reported in specific financial state-
ment captions have been reclassified to conform to the
2001 presentation.

PER SHARE OF COMMON STOCK
Basic earnings per share have been computed based on the
average number of common shares outstanding. Diluted
earnings per share reflects the dilutive impact of outstanding
stock options, computed using the treasury stock method,
performance units, and in 1999 and 2000, Goodyear’s 1.2%
Convertible Note Payable Due 8/01. All earnings per share
amounts in these notes to financial statements are diluted,
unless otherwise noted. Refer to Note 12.

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 2

STRATEGIC ALLIANCE
On September 1, 1999, Goodyear commenced operations
under a global alliance with Sumitomo Rubber Industries
Ltd. (“Sumitomo”) which included, among other things, the
formation of tire manufacturing and sales joint ventures. In
addition to its businesses contributed to the joint ventures,
Goodyear paid $931.6 million to Sumitomo and its affili-
ates, which was financed by the issuance of additional debt.
Under the global alliance agreements, Goodyear acquired
75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires
Europe B.V., a Netherlands holding company. Concurrently,
the holding company acquired substantially all of
Sumitomo’s tire businesses in Europe, including eight tire
manufacturing plants located in England, France and
Germany and sales and distribution operations in 18
European countries, and most of Goodyear’s tire businesses
in Europe. Excluded from the European joint venture are
Goodyear’s tire businesses in Poland (other than a sales com-
pany), Slovenia and Turkey (as well as Morocco and South
Africa), Goodyear’s aircraft tire businesses, and Goodyear’s
textile, steel tire cord and tire mold manufacturing plants, a
technical center and related facilities located in Luxembourg.
Goodyear also acquired 75%, and Sumitomo acquired

25%, of Goodyear Dunlop Tires North America Ltd., a
holding company that purchased Sumitomo’s tire manufac-
turing operations in North America and certain of its related
tire sales and distribution operations. In addition, Goodyear
acquired 100% of the balance of Sumitomo’s Dunlop Tire
distribution and sales operations in the United States and
Canada. Goodyear also acquired a 25% (and Sumitomo
acquired a 75%) equity interest in each of two tire compa-
nies in Japan, one for the distribution and sale of Goodyear-
brand passenger and truck tires in the replacement market
in Japan and the other for the distribution and sale of
Goodyear-brand and Dunlop-brand tires to original equip-
ment manufacturers in Japan. Goodyear transferred certain
assets of its subsidiary located in Japan in exchange for such
equity interests and approximately $27 million in cash.

Goodyear also acquired a 51% (and Sumitomo acquired a

49%) equity interest in a company that will coordinate and
disseminate commercialized tire technology among
Goodyear, Sumitomo, the joint ventures and their respective
affiliates, and an 80% (and Sumitomo acquired a 20%) equity
interest in a global purchasing company. The global alliance
Agreements also provided for the investment by Goodyear and
Sumitomo in the common stock of the other. Refer to Note 8.
Goodyear accounted for the strategic alliance using the

contributed by Sumitomo included $130 million of debt.
Approximately $367 million of goodwill was recorded on
the transaction which was being amortized on a straight-
line basis over 40 years. Amortization was discontinued on
January 1, 2002, as a result of Goodyear’s adoption of SFAS
No. 142. Goodyear recognized a gain of $149.7 million
($143.7 million after tax or $.90 per share) on the change
of control of 25% of the businesses it contributed to the
European joint venture.

The following table presents supplemental pro forma
estimated results of operations for 1999 as if the joint ven-
tures had commenced operations on January 1, 1999.
Historical results of the acquired businesses have been
adjusted to exclude non-recurring items and to reflect
changes in the carrying amounts and depreciable lives of
certain fixed assets. The pro forma information also reflects
amortization of goodwill recorded by Goodyear and inter-
est expense at 6% associated with the debt incurred to
finance Goodyear’s cash payment of $931.6 million to
Sumitomo and its affiliates.

(IN MILLIONS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31,

Net Sales

Net Income

Net Income Per Share — Basic

Net Income Per Share — Diluted

1999

(UNAUDITED)
$14,970.1

$ 243.7

$ 1.56

$ 1.53

NOTE 3

RATIONALIZATIONS
To maintain global competitiveness, Goodyear has imple-
mented rationalization actions over the past several years
for the purpose of reducing over-capacity, eliminating
redundancies and reducing costs. The net amounts of
rationalization charges (credits) to the Consolidated
Statement of Income by quarter for the periods indicated
were as follows:

(IN MILLIONS)
YEAR ENDED DECEMBER 31,
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2001
$ 79.0
—
—
127.8
$ 206.8

2000
$ —
4.7
1.2
118.2
$124.1

1999
$167.4
(9.6)
6.1
7.7
$171.6

FOURTH QUARTER 2001 PROGRAM
Goodyear recorded a net rationalization charge totaling
$127.8 million ($101.2 million after tax or $.62 per share) in
the fourth quarter of 2001, which included a $4.1 million
reversal of reserves no longer needed for their originally
intended purposes. These actions were in response to

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N O T E S T O F I N A N C I A L S T A T E M E N T S

continued competitive market conditions and worldwide
economic uncertainty. Under these actions, Goodyear has
provided for worldwide associate reductions through retail
and administrative consolidation and manufacturing plant
downsizing and consolidation. Of this charge, $89.4 million
related to future cash outflows, primarily associate severance
and noncancellable lease costs, and $42.5 million related to
non-cash charges, primarily for the writeoff of equipment
taken out of service.

Associate-related rationalization costs totaling $58.8 million
were recorded and incurred in the fourth quarter of 2001 as follows:

(IN MILLIONS)
Plant downsizing

and consolidation
Retail and administrative

consolidation

RECORDED

INCURRED

BALANCE AT
12/31/01

$21.2

$ —

$21.2

37.6
$58.8

(1.6)
$(1.6)

36.0
$57.2

Under the above programs, Goodyear provided for the
release of approximately 2,200 associates around the world,
primarily production and administrative associates. During
2001, approximately 300 associates were released at a cost of
$1.6 million, however, a significant amount of the payments
related to these associates will be incurred during 2002.

Rationalization costs, other than associate-related costs,

totaling $73.1 million were recorded and incurred in the
fourth quarter of 2001 as follows:

(IN MILLIONS)
Plant downsizing

and consolidation
Retail and administrative

consolidation

RECORDED

INCURRED

BALANCE AT
12/31/01

$45.2

$(40.0)

$ 5.2

27.9
$73.1

(2.5)
$(42.5)

25.4
$30.6

These costs were primarily for the writeoff of equipment
taken out of service and noncancellable lease costs.
Goodyear incurred $42.5 million of other than associate-
related costs during 2001 for the writeoff of equipment
taken out of service.

FIRST QUARTER 2001/FOURTH QUARTER 2000 PROGRAM
Goodyear recorded a rationalization charge on the
Consolidated Statement of Income totaling $79.0 million
($57.1 million after tax or $.36 per share) in the 2001 first
quarter. Of this amount, $40.7 million related to future cash
outflows, primarily associate severance costs and $38.3 mil-
lion related to non-cash charges, primarily $33.3 million for
special termination benefits and pension curtailments relat-
ed to a voluntary exit program in the United States. Of the
$79.0 million charge, $12.5 million related to the closure of
Goodyear’s manufacturing facility in Italy announced in 1999

and $66.5 million continued the rationalization programs
announced in the fourth quarter of 2000.

Goodyear recorded a net rationalization charge totaling

$124.1 million ($100.1 million after tax or $.63 per share)
during 2000, of which $4.7 million related to the 1999 pro-
gram, primarily the closure of Goodyear’s manufacturing
facility in Italy, and $119.4 million related to rationalization
actions announced during 2000. Of the $119.4 million,
$86.4 million related to future cash outflows, primarily for
associate severance costs and $33.0 million related to non-
cash writeoffs. These 2000 actions were for global work-
force reductions and manufacturing facility consolidations
including the closure of a tire plant in Latin America.

Associate-related rationalization costs for the first quarter

2001/fourth quarter 2000 totaled $152.0 million. Activity
during 2001 is presented below:

(IN MILLIONS)
Plant downsizing

and consolidation
Worldwide associate

reductions

BALANCE AT
12/31/00

2001
CHARGES

INCURRED

REVERSED

BALANCE AT
12/31/01

$48.0

$10.8 $ (56.8)

$( .9)

$1.1

25.2
$73.2

48.6
(66.0)
$59.4 $(122.8)

(3.0)
$(3.9)

4.8
$5.9

Under the above programs, Goodyear provided for the
release of approximately 7,100 associates around the world,
primarily production and support associates. To date, 6,800
associates have been released for which Goodyear incurred
costs totaling $122.8 million during 2001. Goodyear plans
to release the remaining 300 associates and complete the
plan in the first quarter of 2002.

Rationalization costs, other than associate-related costs,
for these programs totaled $33.9 million, and were primarily
for the writeoff of equipment taken out of service, scrap
removal costs and noncancellable lease costs. Goodyear plans
to complete these actions during the first quarter of 2002.
Activity during 2001 is presented below:

(IN MILLIONS)
Plant downsizing

BALANCE AT
12/31/00

2001
CHARGES

INCURRED

REVERSED

BALANCE AT
12/31/01

and consolidation

$8.8

$7.1

$(12.3)

$(.2)

$3.4

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N O T E S T O F I N A N C I A L S T A T E M E N T S

was recorded, of which $47.6 million related to non-cash
writeoffs and $192.5 million related to future cash outflows,
primarily for associate severance costs. The associate-related
charges of $171.6 million provided for the release of
approximately 5,000 associates worldwide. Non-associate-
related costs of $68.5 million were primarily for the writeoff
of equipment taken out of service and noncancellable con-
tracts at the closed manufacturing facilities. Goodyear
recorded additional charges of $4.7 million in 2000 and
$12.5 million in 2001 related to the closing of the manufac-
turing facility in Italy for associates that accepted negotiated
benefits in those respective periods.

Activity during 2001 for associate-related and other than

associate-related costs related to the 1999 actions are
presented below:

(IN MILLIONS)

BALANCE AT
12/31/00
$4.3

2001
CHARGES
$12.5

BALANCE AT
INCURRED
12/31/01
$(16.0) $.8

Under the above programs, approximately 350 associates
were released in 2001 at a cost of $16.0 million, including
the remaining costs related to the 1999 closing of the tire
plant in Italy. Goodyear has completed these actions with
the exception of ongoing severance payments.

Goodyear committed to certain rationalization actions
related to the Dunlop businesses acquired from Sumitomo
on September 1, 1999, for the purpose of optimizing market
growth opportunities and maximizing cost efficiencies.
Goodyear has recorded costs totaling $72.8 million, includ-
ing $5.7 million in the first quarter of 2001, substantially all
of which was for future cash outflows. Under these rationali-
zation programs, associate-related costs for the release or
relocation of approximately 2,000 production, support,
technical, retail and administrative associates totaling $58.5
million were recorded, and rationalization costs, other than
associate-related costs, totaling $14.3 million were recorded
primarily for lease cancellations and noncancellable leases.

During 2001, Goodyear incurred associate-related costs
of $16.5 million for the release of approximately 800 associ-
ates. During 2001, Goodyear evaluated the remaining
reserves and recorded total reversals of $5.0 million for
reserves no longer needed for their originally intended pur-
poses. The remaining balance of $1.9 million relates to
ongoing associate severance payments. During 2001,
Goodyear incurred $5.6 million for rationalization costs,
other than associate-related costs, primarily for ongoing
lease payments. The remaining balance for rationalization
costs, other than associate-related costs, at December 31,
2001 was $4.9 million. Goodyear has completed these
actions during 2001, except for future rental payments
under noncancellable leases.

NOTE 4

OTHER (INCOME) AND EXPENSE
(IN MILLIONS)
Asset sales
Interest income
Financing fees and

2001
$ (44.4)
(13.5)

2000
$ (5.0)
(13.9)

1999
$(166.7)
(16.3)

financial instruments

Miscellaneous

50.1
19.6
$ 11.8

44.8
1.9
$ 27.8

41.1
(5.2)
$(147.1)

During 2001, Goodyear recorded a gain of $17.0 million
($13.9 million after tax or $.09 per share) resulting from the
sale of land and buildings in the United Kingdom in the
first quarter. Additionally, Goodyear recorded a gain of
$27.4 million ($16.9 million after tax or $.10 per share)
resulting from the sale of the Specialty Chemical Business in
the 2001 fourth quarter. Other (Income) and Expense in the
third quarter of 2000 included a gain of $5.0 million ($3.2
million after tax or $.02 per share) on the sale of land at a
manufacturing facility in Mexico. During 1999, Goodyear
recorded a gain of $149.7 million ($143.7 million after tax
or $.90 per share) on the change in control of 25% of the
European businesses contributed to Goodyear Dunlop Tires
Europe B.V. by Goodyear. In addition, proceeds of $17.0
million ($11.1 million after tax or $.07 per share) were real-
ized in 1999 from Goodyear’s sale of customer lists and for-
mulations in connection with its exit from the production of
certain rubber chemicals.

Interest income consists of amounts earned on deposits.

At December 31, 2001, $127.1 million or 13.2% of
Goodyear’s cash, cash equivalents and short term securities
were concentrated in Latin America, primarily Brazil ($93.2
million or 36.9% at December 31, 2000) and $82.1 million or
8.6% were concentrated in Asia ($65.8 million or 26.0% at
December 31, 2000). Dividends received by the Company

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N O T E S T O F I N A N C I A L S T A T E M E N T S

The following table presents certain cash flows between

Goodyear and Wingfoot A/R LLC:
(IN MILLIONS)
Proceeds from new securitizations
Proceeds from collections reinvested in

previous securitizations

Servicing fees received
Reimbursement for rebates and discounts issued

2001
$ 741.5

4,448.6
4.3
112.0

Various international subsidiaries of Goodyear have also
established accounts receivable continuous sales programs
whereunder these subsidiaries may receive proceeds from
the sale of certain of their receivables to affiliates of certain
banks. These subsidiaries retained servicing responsibilities.
At December 31, 2001, the value in U.S. dollars of which
these international subsidiaries may borrow is approximately
$150 million.

The following table presents certain cash flows related to

these programs:
(IN MILLIONS)
Proceeds from new securitizations
Proceeds from collections reinvested in

previous securitizations

Reimbursement for rebates and discounts issued

2001
$ 124.5

254.8
15.2

In addition, various other international subsidiaries of
Goodyear sold certain of their trade receivables during 2001
and 2000. The balance of net proceeds from all domestic and
international agreements worldwide was $851.8 million at
December 31, 2001, compared to $604.2 million at
December 31, 2000.

NOTE 6

INVENTORIES

(IN MILLIONS)
Raw materials
Work in process
Finished product

2001
$ 398.8
112.5
1,869.6
$2,380.9

2000
$ 480.4
123.5
2,275.8
$2,879.7

and domestic subsidiaries from its consolidated international
operations for 2001, 2000 and 1999 were $114.8 million,
$102.2 million and $352.4 million, respectively.

Financing fees and financial instruments consist

primarily of fees paid under Goodyear’s domestic accounts
receivable continuous sale programs. Refer to Note 5.

NOTE 5

ACCOUNTS AND NOTES RECEIVABLE
(IN MILLIONS)
Accounts and notes receivable
Allowance for doubtful accounts

2001
$1,571.7
(84.9)
$1,486.8

2000
$2,168.0
(93.3)
$2,074.7

During the second quarter of 2001, Goodyear terminated its
$550 million domestic accounts receivable continuous sale
program and entered into a new program. The new program
involves the continuous sale of substantially all of Goodyear’s
domestic trade accounts receivable to Wingfoot A/R LLC, a
wholly-owned limited liability subsidiary company that is a
bankruptcy-remote special purpose entity. The results of
operations and financial position of Wingfoot A/R LLC are
not included in the consolidated financial statements of
Goodyear as provided by Statement of Financial Accounting
Standards No. 140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities.”
Wingfoot A/R LLC purchases Goodyear’s receivables with
(a) the cash proceeds of borrowings from a group of five
bank-affiliated issuers of commercial paper, which borrow-
ings are secured by the trade accounts receivable purchased
from Goodyear ($580.0 million at December 31, 2001), (b)
the cash proceeds of Goodyear’s $98.2 million equity invest-
ment in Wingfoot A/R LLC and, (c) a subordinated note
payable to the Company in the amount of $385.2 million at
December 31, 2001, which is equal to the total amount of
trade receivables purchased by Wingfoot A/R LLC minus the
sum of the equity of Wingfoot A/R LLC and the cash pro-
ceeds from the sale of the notes issued by Wingfoot A/R
LLC to the five bank affiliated note purchasers and minus a
discount. Goodyear retained the responsibility for servicing
the receivables. As the receivables are collected, the cash
proceeds are used to purchase additional receivables.
Goodyear pays fees under the program based on certain vari-
able market interest rates and other agreed amounts. These
fees are reported as Other (Income) and Expense. Wingfoot
A/R LLC may borrow up to $825 million from the note pur-
chasers. The amount that may be borrowed from time to
time by Wingfoot A/R LLC depends on, among other
things, the total uncollected balance of receivables owned by
it. The borrowings are available to Wingfoot A/R LLC until
February 2003, unless extended by the lenders for additional
one-year periods.

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 7

GOODWILL

(IN MILLIONS)
Goodwill
Accumulated amortization

2001
$ 676.7
(107.6)
$ 569.1

2000
$ 669.6
(81.2)
$ 588.4

Amortization of goodwill totaled $26.4 million, $25.7 mil-
lion and $24.1 million in 2001, 2000 and 1999, respectively.
Goodyear adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), “Goodwill and Other
Intangible Assets” effective January 1, 2002. This standard
specifies, among other things, that goodwill no longer be
amortized. The standard requires goodwill to be periodical-
ly tested for impairment and written down to fair value if
considered impaired.

NOTE 8

INVESTMENTS
INVESTMENTS
On February 25, 1999, Goodyear purchased at par from
Sumitomo a 1.2% Convertible Note Due August 16, 2000,
in the principal amount of ¥13,073,070,934 (the “Sumitomo
Note”). On August 15, 2000, Goodyear converted the
entire principal amount of the Sumitomo Note into shares
of the Common Stock of Sumitomo (the “Sumitomo
Investment”). Goodyear has classified the Sumitomo
Investment as available-for-sale, as provided in Statement of
Financial Accounting Standards No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”.

The fair value of the Sumitomo Investment was $90.1
million and $100.9 million at December 31, 2001 and 2000,
respectively, and is included in Other Assets on the
Consolidated Balance Sheet. Changes in the fair value of the
Sumitomo Investment are reported in the Consolidated
Balance Sheet as Accumulated Other Comprehensive
Income. Goodyear’s 1.2% Convertible Note Payable Due
August 16, 2001 in the principal amount of ¥6,536,535,767
had been designated as a hedge of the exchange exposure of
the Sumitomo Investment during 2000. To the extent the
hedge was effective, the effect of exchange rate changes on
Goodyear’s Note were reported on the Consolidated Balance
Sheet as Accumulated Other Comprehensive Income. At
December 31, 2001 the gross unrealized holding loss on the
Sumitomo Investment, net of the hedge, totaled $26.8 mil-
lion ($16.6 million after tax), compared to $16.1 million
($10.0 million after tax) at December 31, 2000.

NONCASH INVESTING AND FINANCING ACTIVITIES
The Consolidated Statement of Cash Flows is presented net
of the following transactions:

In connection with Goodyear’s strategic alliance with
Sumitomo, on February 25, 1999 the Company issued to
Sumitomo at par its 1.2% Convertible Note Due August 16,
2000, in the principal amount of ¥13,073,070,934 pursuant
to a Note Purchase Agreement dated February 25, 1999 (the
“Note Agreement”). The Company’s Note was convertible
during the period beginning July 16, 2000 through August
15, 2000 into 2,281,115 shares of the Common Stock, with-
out par value, of the Company at a conversion price of
¥5,731 per share, subject to certain adjustments. In addition,
on February 25, 1999, the Company purchased at par from
Sumitomo a 1.2% Convertible Note Due August 16, 2000,
in the principal amount of ¥13,073,070,934 (the “Sumitomo
Note”). The Sumitomo Note was convertible, if not earlier
redeemed, during the period beginning July 16, 2000
through August 15, 2000 into 24,254,306 shares of the
Common Stock, ¥50 par value per share, of Sumitomo at a
conversion price of ¥539 per share, subject to certain adjust-
ments. The principal amount of each Note was equivalent to
$108.0 million at February 25, 1999. The Company convert-
ed the Sumitomo Note in its entirety on July 27, 2000 into
24,254,306 shares of the Common Stock of Sumitomo,
which represents 10% of Sumitomo’s outstanding shares.

On July 7, 2000, Goodyear and Sumitomo amended the

Note Agreement and on August 15, 2000: (1) Sumitomo
converted ¥6,536,535,167 principal amount of the
Company’s Note into approximately 1,138,030 shares of the
Common Stock of the Company; (2) the Company paid
¥223,933,167 of interest on the Note; and (3) Sumitomo
surrendered the Note and the Company issued a replace-
ment note in the principal amount of ¥6,536,535,767 due
on August 16, 2001 and payable at the Company’s option in
cash or in shares of Common Stock at a conversion price of
¥5,731, subject to adjustment. The replacement note bore
interest at the rate of 1.2% per annum from August 15,
2000 until the fifteenth day prior to its conversion into
1,140,866 shares of the Company’s Common Stock on
February 6, 2001.

The acquisition cost of the strategic alliance with

Sumitomo in 1999 included the approximately $307 million
fair value of 25% of Goodyear’s businesses contributed to
the European joint venture. Goodyear also acquired debt
totaling $130 million in Dunlop’s European and North
American businesses.

In 2001, the Company issued 4.3 million shares of its
common stock with a market value of approximately $100.0
million as a contribution to certain domestic pension plans.
In 2000, Goodyear acquired a majority ownership interest
in a retreading production and distribution operation in the
United States, and recorded a liability for the expected
future payment of $72.5 million. In 1999, Goodyear’s
Slovenian tire manufacturing subsidiary recorded fixed
assets totaling $43.4 million acquired under a capital lease.

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N O T E S T O F I N A N C I A L S T A T E M E N T S

PROPERTIES AND PLANTS

(IN MILLIONS)
Properties and plants, at cost:
Land and improvements
Buildings and improvements
Machinery and equipment
Construction in progress

Accumulated depreciation

NOTE 9

2001

2000

OWNED

CAPITAL LEASES

TOTAL

OWNED

CAPITAL LEASES

TOTAL

$ 368.0
1,606.3
8,530.4
440.9
10,945.6

$ 15.3
98.7
87.1
—
201.1

$ 383.3
1,705.0
8,617.5
440.9
11,146.7

$ 390.3
1,683.4
8,537.5
550.9
11,162.1

$ 20.7 $ 411.0
1,791.9
8,629.8
550.9
221.5 11,383.6

108.5
92.3
—

(5,957.1)

$ 4,988.5

(73.5)

(6,030.6)
$127.6 $ 5,116.1

(5,785.5)
$ 5,376.6

(77.1)

(5,862.6)
$144.4 $ 5,521.0

The weighted average useful lives of property used in arriving at the annual amount of depreciation provided are as follows: build-
ings and improvements, approximately 18 years; machinery and equipment, approximately 10 years.

LEASED ASSETS
Net rental expense charged to income follows:

(IN MILLIONS)
Gross rental expense
Sublease rental income

NOTE 10

2001
2001
$288.8
(67.8)
$221.0

2000
$289.9
(69.1)
$220.8

1999
$260.4
(72.5)
$187.9

Goodyear enters into capital and operating leases primarily for its vehicles, data processing equipment and its wholesale and retail
distribution facilities under varying terms and conditions. Goodyear subleases some of its domestic retail distribution network to
independent dealers. Many of the leases provide that Goodyear will pay taxes assessed against leased property and the cost of
insurance and maintenance.

While substantially all subleases and some operating leases are cancellable for periods beyond 2002, management expects that
in the normal course of its business nearly all of its independent dealer distribution network will be actively operated. As leases and
subleases for existing locations expire, Goodyear would normally expect to renew the leases or substitute another more favorable
retail location.

The following table presents minimum future lease payments:

(IN MILLIONS)
Capital Leases

Minimum lease payments
Minimum sublease rentals

Imputed interest
Executory costs
Present value

Operating Leases

Minimum lease payments
Minimum sublease rentals

Imputed interest
Present value

2002

2003

2004

2005

2006

2007 AND
BEYOND

TOTAL

$ 9.5
(.1)
$ 9.4

$ 7.9
—
$ 7.9

$ 6.6
—
$ 6.6

$ 5.2
—
$ 5.2

$ 4.5
—
$ 4.5

$ 45.7
—
$ 45.7

$272.1
(44.1)
$228.0

$201.2
(36.4)
$164.8

$158.5
(27.2)
$131.3

$123.3
(18.9)
$104.4

$116.0
(10.8)
$105.2

$432.1
(17.2)
$414.9

$ 79.4
(.1)
$ 79.3

(29.7)
(.9)
$ 48.7

$1,303.2
(154.6)
$1,148.6

(385.0)
$ 763.6

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 11

FINANCING ARRANGEMENTS AND
DERIVATIVE FINANCIAL INSTRUMENTS

SHORT TERM DEBT AND FINANCING ARRANGEMENTS
Substantial short term and long term credit sources are
available to Goodyear globally under normal commercial
practices. In total, Goodyear had credit arrangements of
$6.1 billion available at December 31, 2001, of which
$2.6 billion were unused.

At December 31, 2001, Goodyear had short term com-

mitted and uncommitted credit arrangements totaling
$1.3 billion, of which $1.1 billion were 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 or compensating balances associat-
ed with these arrangements.

Goodyear had outstanding debt obligations, which by
their terms are due within one year, amounting to $364.7
million at December 31, 2001. Current maturities of long
term debt represented $109.7 million of this total, with a
weighted average interest rate of 5.46% at December 31,
2001. The remaining $255.0 million was short term debt of
international subsidiaries, with a weighted average interest
rate of 6.6% at December 31, 2001.

LONG TERM DEBT AND FINANCING ARRANGEMENTS
At December 31, 2001, Goodyear had long term credit
arrangements totaling $4.8 billion, of which $1.5 billion
were unused.

The following table presents long term debt at

December 31:
(IN MILLIONS)
5.375% Swiss franc bond due 2006
6.375% Euro Notes due 2005
Notes:

8 1/8% due 2003
6 5/8% due 2006
8 1/2% due 2007
6 3/8% due 2008
7 6/7% due 2011
7% due 2028

Bank term loans due 2002 – 2005
Domestic short term borrowings
Other domestic and international debt

Capital lease obligations

Less portion due within one year

2001
$ 94.5
354.5

2000
$ 96.7
371.1

299.8
249.5
300.0
99.7
650.0
149.0
895.7
—
171.8

299.7
249.4
300.0
99.7
—
148.9
151.4
500.0
229.4

3,264.5
48.8

3,313.3
109.7
$3,203.6

2,446.3
62.5

2,508.8
159.2
$2,349.6

In addition to the amounts in the table above, on February
25, 1999 Goodyear issued to Sumitomo Rubber Industries at
par its 1.2% Convertible Note Due August 16, 2000, in the
principal amount of ¥13,073,070,934 (equivalent to $127.8
million at December 31, 1999). Goodyear’s Note was con-
vertible, if not earlier redeemed, during the period begin-
ning July 16, 2000 through August 15, 2000 into 2,281,115
shares of the Common Stock, without par value, of the
Company at a conversion price of ¥5,731 per share, subject
to certain adjustments.

On August 15, 2000, Sumitomo converted

¥6,536,535,167 principal amount of the Note into approxi-
mately 1,138,030 shares of the Common Stock of the
Company, and Goodyear issued a replacement note in the
principal amount of ¥6,536,535,767 due on August 16, 2001
(equivalent to $56.9 million at December 31, 2000) bearing
interest at 1.2% per annum and payable at Goodyear’s
option in cash or in shares of Common Stock at a conver-
sion price of ¥5,731, subject to adjustment. The replace-
ment note was convertible into Common Stock of the
Company at a conversion price of ¥5,731 per share, subject
to adjustment, at any time prior to maturity. On February 6,
2001, Sumitomo converted the replacement note into
1,140,866 shares of Common Stock of the Company.

At December 31, 2001, the fair value of Goodyear’s long
term fixed rate debt amounted to $2.36 billion, compared to
its carrying amount of $2.35 billion. At December 31, 2000,
the fair value of Goodyear’s long term fixed rate debt
amounted to $1.73 billion, compared to its carrying amount
$1.78 billion. The difference was attributable primarily to
the long term Notes issued in 2001 and 2000. The fair value
was estimated using quoted market prices or discounted
future cash flows. The fair value of Goodyear’s variable rate
debt approximated its carrying amount at December 31,
2001 and 2000.

The Swiss franc bond was hedged by foreign exchange
contracts at December 31, 2001 and 2000, as discussed below.
Goodyear has designated €100 million principal amount
of the Euro Notes as hedging the exposure to the impact of
Euro/U.S. dollar exchange rate movements on the equity of
certain of its subsidiaries in Europe. The remaining €300
million principal amount is hedged by foreign exchange
contracts, as discussed below.

The Notes and Euro Notes have an aggregate face
amount of $2.1 billion and are reported net of unamortized
discount aggregating $2.7 million ($1.5 billion and $3.2
million, respectively, at December 31, 2000).

The bank term loans due 2002 through 2005 are com-
prised of $890.0 million of variable rate agreements based
upon LIBOR plus a fixed spread, bearing interest at a
weighted average rate of 4.0% per annum, and $5.7 million

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N O T E S T O F I N A N C I A L S T A T E M E N T S

of fixed rate agreements bearing interest at a weighted aver-
age rate of 6.1% per annum at December 31, 2001.

There were no domestic short term bank borrowings
outstanding at December 31, 2001. At December 31, 2000,
all commercial paper outstanding, which was issued for
terms of less than 154 days, and certain domestic short term
bank borrowings outstanding, which by their terms are or
were due within one year, were classified as long term debt
on the Consolidated Balance Sheet. These obligations were
supported by lending commitments under the two revolving
credit facilities described below. It was the Company’s
intent to maintain these debt obligations as long term.

Other domestic and international debt consisted of fixed

and floating rate bank loans denominated in U.S. dollars
and other currencies and maturing in 2002-2004. The
weighted average interest rate in effect under these loans
was 6.22% at December 31, 2001.

The Company is a party to two revolving credit facility
agreements, consisting of a $750 million five-year revolving
credit facility and a $775 million 364-day revolving credit
facility. These agreements were amended in August and
November, 2001.

The $750 million five-year credit facility agreement is
with 26 domestic and international banks and provides that
the Company may borrow at any time until August 15,
2005, when the commitment terminates and any outstand-
ing loans mature. Goodyear pays a commitment fee ranging
from 12.5 to 25 basis points (based on its ratio of debt to
debt plus equity) on the entire amount of the commitment
(whether or not borrowed) and a usage fee on amounts bor-
rowed (other than on a competitive bid or prime rate basis)
ranging from 37.5 to 125 basis points over LIBOR (or 50 to
137.5 basis points over a defined CD rate). These fees may
fluctuate quarterly within these ranges based upon
Goodyear’s leverage. During 2001, commitment fees aver-
aged 19.5 basis points.

The $775 million 364-day credit facility agreement is
with 26 domestic and international banks and provides that
the Company may borrow until August 13, 2002, on which
date the facility commitment terminates, except as it may be
extended on a bank by bank basis. If a bank does not extend
its commitment if requested to do so, the Company may
obtain from such bank a two year term loan up to the
amount of such bank’s commitment. Goodyear pays a com-
mitment fee ranging from 10 to 20 basis points on the
entire amount of the commitment (whether or not bor-
rowed) and a usage fee on amounts borrowed (other than
on a competitive bid or prime rate basis) ranging from 40 to
130 basis points over LIBOR (or 52.5 to 142.5 basis points
over a defined CD rate). These fees may fluctuate quarterly
within these ranges based upon Goodyear’s leverage. During
2001, commitment fees averaged 14.6 basis points.

Each of the facilities provide that the Company may
obtain loans bearing interest at reserve adjusted LIBOR or a
defined certificate of deposit rate, plus in each case the
applicable usage fee, at rates based on the prime rate, or at
rates determined on a competitive bid basis. Under each of
the facility agreements, a utilization fee of 25 basis points
per annum is charged each day on which the sum of the
outstanding loans exceeds 50% of the total commitment.
No utilization fees were paid during 2001. Each facility
agreement contains certain covenants which, among other
things, require the Company to maintain at the end of each
fiscal quarter a minimum consolidated net worth and a
defined minimum interest coverage ratio. In addition, the
facility agreements establish a limit on the aggregate
amount of consolidated debt the Company and its sub-
sidiaries may incur. There are no borrowings outstanding
under these agreements at December 31, 2001. These
revolving credit facilities support, among other things, the
uncommitted short term bank facilities.

The annual aggregate maturities of long term debt and
capital leases for the five years subsequent to 2001 are pre-
sented 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.

(IN MILLIONS)
Debt incurred under

or supported
by revolving
credit agreements

Other

2002

2003

2004

2005

2006

$ — $ — $ — $ — $ —
346.0
109.7 414.6
$109.7 $414.6 $807.6 $407.1 $346.0

807.6 407.1

Refer to Note 5 for additional information on financing
arrangements. Refer to Note 10 for additional information
on capital lease obligations.

DERIVATIVE FINANCIAL INSTRUMENTS
Goodyear adopted Statement of Financial Accounting
Standards No. 133, as amended and interpreted, on
January 1, 2001.

Interest Rate Exchange Contracts
Goodyear actively manages its fixed and floating rate debt
mix, within defined limitations, using refinancings and
unleveraged interest rate swaps. Goodyear will enter into
fixed and floating interest rate swaps to hedge against the
effects of adverse changes in interest rates on consolidated
results of operations and future cash outflows for interest.
Fixed rate swaps are used to reduce Goodyear’s risk of
increased interest costs during periods of rising interest

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N O T E S T O F I N A N C I A L S T A T E M E N T S

rates, and are normally designated as cash flow hedges.
Floating rate swaps are used to convert the fixed rates of
long term borrowings into short term variable rates, and are
normally designated as fair value hedges. Interest rate swap
contracts are used by Goodyear to separate interest rate risk
management from the debt funding decision. At December
31, 2001, the interest rate on 75% of Goodyear’s debt was
fixed by either the nature of the obligation or through the
interest rate contracts, compared to 54% at December 31,
2000.

The following table presents contract information and

weighted average interest rates. Current market pricing
models were used to estimate the fair values of interest rate
exchange contracts.

(DOLLARS IN MILLIONS)
Fixed rate contracts:

Notional principal

amount
Pay fixed rate
Receive variable

12/31/00

NEW

MATURED

12/31/01

$50.0 $325.0

$50.0

$325.0

6.25% 5.00%

LIBOR

6.67

1.91

5.23

1.91

Average years to
maturity
Fair value:

favorable
(unfavorable)
Carrying amount:
Long term
assets
Current

(liability)
Long term
(liability)

2.2

$ —

$ (9.2)

—

(.2)

—

(8.3)

(1.1)

Interest Rate Lock Contracts
Goodyear will use, when appropriate, interest rate lock con-
tracts to hedge the risk-free rate component of anticipated
long term debt issuances. These contracts are designated as
cash flow hedges of forecasted transactions. Gains and loss-
es on these contracts are amortized to income over the life
of the debt. No contracts were outstanding at December 31,
2001 or 2000.

Foreign Currency Contracts
In order to reduce the impact of changes in foreign
exchange rates on consolidated results of operations and
future foreign currency-denominated cash flows, Goodyear
will enter into foreign currency contracts. These contracts
reduce exposure to currency movements affecting existing
foreign currency-denominated assets, liabilities, firm com-
mitments and forecasted transactions resulting primarily
from trade receivables and payables, equipment acquisitions,
intercompany loans and royalty agreements and forecasted
purchases and sales. In addition, the principal and interest
on Goodyear’s Swiss franc bond due 2006 and €300 million
of Euro Notes due 2005 are hedged by currency swap
agreements.

Contracts hedging the Swiss franc bond, the Euro Notes

and forecasted transactions under intercompany royalty
agreements are designated as cash flow hedges. The hedged
intercompany royalty transactions will occur during 2002
and 2003. Contracts hedging short-term trade receivables
and payables normally have no hedging designation.

Amounts are reclassified from OCI into earnings each
period to offset the effects of exchange rate movements on
the principal and interest of the Swiss franc bond and the
Euro Notes. Amounts are also reclassified concurrently with
the recognition of intercompany royalty expense.

Weighted average information during the years 2001, 2000
and 1999 follows:
(DOLLARS IN MILLIONS)

2000

2001

1999

Fixed rate contracts:
Notional principal
Receive variable LIBOR
Pay fixed rate

$ 129

$ 71

$ 96

3.58%
5.43

6.63% 5.26%
6.24

6.18

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N O T E S T O F I N A N C I A L S T A T E M E N T S

Hedges of Net Investment in Foreign Operations
In order to reduce the impact of changes in foreign
exchange rates on consolidated shareholders’ equity,
Goodyear has designated certain foreign currency-denomi-
nated nonderivative instruments as hedges of its net invest-
ment in various foreign operations.

On January 1, 2001, €100 million of Goodyear’s 6 5/8%
Notes due 2005 was designated as hedging Goodyear’s net
investment in European subsidiaries which have the Euro as
the functional currency. In addition, from January 1 to
February 6 of 2001, Goodyear’s ¥6,536,535,767 Sumitomo
1.2% Convertible Note Payable Due August 2001 was des-
ignated as hedging Goodyear’s net investment in Japanese
subsidiaries which have the Yen as the functional currency.
The Note Payable was converted into shares of the
Common Stock of the Company on February 6, 2001.

Results of Hedging Activities
Ineffectiveness and premium amortization pretax charges
totaled $1.5 million during the twelve months ended
December 31, 2001. Deferred net pretax losses totaling
$7.1 million on hedges of forecasted transactions are antici-
pated to be recognized in income during the twelve months
ending December 31, 2002. It is not practicable to estimate
the amount of deferred gains and losses that will be recog-
nized in income resulting from the remeasurement of cer-
tain long term currency exchange contracts.

Deferred pretax gains totaling $4.9 million were record-
ed as Foreign Currency Translation Adjustment during the
twelve months ended December 31, 2001, respectively, as a
result of the designation of nonderivative instruments as net
investment hedges. These gains and losses are only recognized
in earnings upon the complete or partial sale of the related
investment or the complete liquidation of the investment.

The following table presents foreign currency contracts

at December 31:

(IN MILLIONS)

2001

2000

FAIR
VALUE

CONTRACT
AMOUNT

FAIR CONTRACT
AMOUNT

VALUE

Buy currency:
Euro
Swiss franc
U.S. dollar
Canadian dollar
Japanese yen
British pound

Contract maturity:

Swiss franc swap
Euro swap
All other

Sell currency:
Euro
Swedish krona
U.S. dollar
All other

$441.2
99.4
49.6
45.2
16.1
10.3
$661.8

$460.2
94.0
49.0
45.8
16.0
10.3
$675.3

$310.1 $296.7
95.6
106.1
80.2
81.0
—
—
7.5
7.0
—
—
$504.2 $480.0

3/06
6/05
1/02 – 03/03

3/06
6/05
1/01 – 3/04

$ 95.0 $ 96.0
22.4
6.2
5.0
$129.1 $129.6

22.9
6.2
5.0

$ 15.8 $ 15.6
22.9
35.5
6.3
$ 80.3

23.0
35.4
6.3

$ 80.5

Contract maturity:

1/02 – 3/02

1/01 – 3/01

Carrying amount —
asset (liability):

Swiss franc swap —

current

$ (4.6)

Swiss franc swap —

long term
Euro swaps —
current
Euro swaps —
long term

Other —

current asset

Other —

10.2

(5.5)

(15.0)

2.4

current (liability)

(1.1)

$ —

19.0

—

3.2

—

The counterparties to Goodyear’s interest rate swap and for-
eign exchange contracts were substantial and creditworthy
multinational commercial banks or other financial institu-
tions which are recognized market makers. Neither the risks
of counterparty nonperformance nor the economic conse-
quences of counterparty nonperformance associated with
these contracts were considered by Goodyear to be material.

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 12

STOCK COMPENSATION PLANS AND DILUTIVE SECURITIES
The Company’s 1989 Goodyear Performance and Equity Incentive Plan (which expired in 1997 except as to grants and awards
then outstanding) and the 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company provided for the granting
of stock options and stock appreciation rights (SARs), restricted stock, performance grants and other stock-based awards. For
options granted in tandem with SARs, the exercise of a SAR cancels the stock option; conversely, the exercise of the stock option
cancels the SAR. Stock options and related SARs granted during 2001 generally have a maximum term of ten years and vest pro
rata over four years.

Performance units granted during 2001 are earned based on Return on Invested Capital and Total Shareholder Return relative

to the S&P Auto Parts & Equipment Companies (each weighted at 50%) over a three year performance period each beginning
January 1, 2002. To the extent earned, a portion of the performance units will generally be paid in cash (subject to deferral under
certain circumstances) and a portion may be automatically deferred for at least five years in the form of units. Each unit is equiva-
lent to a share of the Company’s Common Stock and payable in cash, shares of the Company’s Common Stock or a combination
thereof at the election of the participant. A maximum of 15,000,000 shares of the Company’s Common Stock are available for
issuance pursuant to grants and awards made under the 1997 Plan through December 31, 2001. The 1997 Plan expired on
December 31, 2001, except as to options and other grants then outstanding.

On December 4, 2000, the Company adopted The Goodyear Tire & Rubber Company Stock Option Plan for Hourly

Bargaining Unit Employees, under which options in respect of up to 3,500,000 shares of the Common Stock of the Company may
be granted, and the Hourly and Salaried Employee Stock Option Plan, under which options in respect of up to 600,000 shares of
the Company’s Common Stock may be granted. Stock options granted under these plans have a maximum term of ten years and
vest over one to three years.

Stock-based compensation activity for the years 2001, 2000 and 1999 follows:

2000

1999

Outstanding at January 1
Options granted
Options without SARs exercised
Options with SARs exercised
SARs exercised
Options without SARs expired
Options with SARs expired
Performance units granted
Performance unit shares issued
Performance units cancelled

Outstanding at December 31

SHARES
19,054,838
3,208,270
(105,360)
(6,665)
(13,500)
(345,151)
(97,285)
283,300
—
(136,649)
21,841,798

2001

SARS
2,783,983
732,248
—
(6,665)
(13,500)
—
(97,285)
—
—
—
3,398,781

SHARES
12,418,808
6,606,441
(36,900)
—
(3,900)
(227,913)
(43,241)
478,200
(127,871)
(8,786)
19,054,838

SARS
2,141,954
689,170
—
—
(3,900)
—
(43,241)
—
—
—
2,783,983

SHARES
9,563,252
3,371,948
(347,312)
(44,126)
(9,870)
(68,342)
(17,363)
13,353
(8,876)
(33,856)
12,418,808

5,741,778

7,433,575

SARS
1,496,670
716,643
—
(44,126)
(9,870)
—
(17,363)
—
—
—
2,141,954

847,358

Exercisable at December 31

12,217,868

1,809,894

8,105,308

1,312,398

Available for grant at December 31

486,130

4,179,728

Significant option groups outstanding at December 31, 2001 and related weighted average price and remaining life information follows:

GRANT DATE

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

EXERCISABLE PRICE

REMAINING LIFE (YEARS)

12/03/01
12/04/00
12/06/99
11/30/98
12/02/97
12/03/96
1/09/96
1/04/95
All other

3,083,590
5,925,564
3,140,719
2,052,699
1,793,929
1,516,966
1,187,814
632,735
1,667,422

$22.05
17.68
32.00
57.25
63.50
50.00
44.00
34.75
37.64

—
2,409,296
1,795,681
1,661,410
1,793,929
1,516,966
1,187,814
632,735
1,220,037

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10
9
8
7
6
5
4
3
2

(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

The 1,667,422 options in the ‘All other’ category were out-
standing at exercise prices ranging from $17.68 to $74.25,
with a weighted average exercise price of $33.89. All
options and SARs were granted at an exercise price equal to
the fair market value of the Company’s common stock at
the date of grant.

Weighted average option exercise price information

follows:

Outstanding at January 1
Granted during the year
Exercised during the year
Outstanding at December 31
Exercisable at December 31

2001
$35.54
22.05
20.53
33.87
41.34

2000
$45.63
17.68
16.59
35.54
47.48

1999
$50.27
32.00
23.71
45.63
47.55

Forfeitures and cancellations were insignificant.

Weighted average fair values at date of grant for grants

in 2001, 2000 and 1999 follow:

Options
Performance units

2001
$ 6.95
22.05

2000
$ 6.58
19.00

1999
$12.85
51.62

The above fair value of options at date of grant was estimat-
ed using the Black-Scholes model with the following
weighted average assumptions:

Expected life (years)
Interest rate
Volatility
Dividend yield

1999
5

2000
5

2001
5
4.48% 5.44% 5.97%
30.5
25.2
2.81
3.18

33.4
2.12

The fair value of performance units at date of grant was
equal to the market value of the Company’s common stock
at that date.

Stock-based compensation costs reduced (increased)

income as follows:

(IN MILLIONS, EXCEPT PER SHARE)
Pretax income
Net income
Net income per share

2001
$ 3.9
2.4
.02

2000
$ .2
.1
—

1999
$(12.4)
(7.7)
(.05)

The following table presents the pro forma reduction in
income that would have been recorded had the fair values of
options granted in each year been recognized as compensa-
tion expense on a straight-line basis over the vesting period
of each grant.

(IN MILLIONS, EXCEPT PER SHARE)
Pretax income
Net income
Net income per share

2001
$43.1
30.5
.19

2000
$33.9
25.3
.16

1999
$30.3
23.2
.15

Basic earnings per share have been computed based on the
average number of common shares outstanding. The follow-
ing table presents the number of incremental weighted aver-
age shares used in computing diluted per share amounts:

2001

2000

1999

Average shares
outstanding
— basic
Stock options
Performance units
1.2% Convertible
Note Payable

Average shares
outstanding
— diluted

159,955,869
—
—

156,840,646
213,443
—

156,182,004
758,437
98,230

—

1,710,837

1,900,928

159,955,869

158,764,926

158,939,599

The average shares outstanding-diluted total for 2001 does
not include the antidilutive impact of 1.8 million shares of
potential common stock associated with stock options and
.1 million shares associated with the Sumitomo 1.2%
Convertible Note Payable.

NOTE 13

SAVINGS PLANS
Substantially all domestic associates are eligible to participate
in one of Goodyear’s two savings plans. Under these plans
associates elect to contribute a percentage of their pay. Most
plans provided for Goodyear’s matching of these contribu-
tions (up to a maximum of 6% of the associate’s annual pay
or, if less, $10,500) at the rate of 50%. Goodyear contribu-
tions were $37.8 million, $41.4 million and $43.0 million for
2001, 2000 and 1999, respectively. A defined contribution
pension plan for certain foreign associates was established
July 1, 1999. Goodyear contributions were $.1 million in
2001 and 2000 and $2.4 million in 1999.

In April 2001, a defined contribution plan was estab-
lished for associates at Wingfoot Commercial Tire Systems
LLC. The Company contributions to this plan were
$1.1 million in 2001.

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N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 14

POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS
The Company and its subsidiaries provide substantially all
domestic associates and associates at certain international sub-
sidiaries with health care and life insurance benefits upon retire-
ment. Insurance companies provide life insurance and certain
health care benefits through premiums based on expected bene-
fits to be paid during the year. Substantial portions of the health
care benefits for domestic retirees are not insured and are paid
by Goodyear. Benefit payments are funded from operations.

Net periodic benefit cost follows:

(IN MILLIONS)
Service cost — benefits

earned during the period

Interest cost
Amortization of unrecognized:

— net losses
— prior service cost

2001

2000

1999

$ 17.8
183.2

$ 19.5
164.2

$ 21.5
145.6

13.6
10.4
$225.0

14.7
(2.2)
$196.2

9.0
(2.3)
$173.8

As a result of rationalization actions, Goodyear recognized
a curtailment gain of $.2 million and a special termination
loss of $6.5 million in 2001 and a curtailment loss of
$3.7 million and a special termination loss of $1.4 million
in 2000. Refer to Note 3.

The following table sets forth changes in the accumulat-

ed benefit obligation and amounts recognized on
Goodyear’s Consolidated Balance Sheet at December 31,
2001 and 2000:

(IN MILLIONS)
Accumulated benefit obligation:
Beginning balance
Service cost — benefits earned
Interest cost
Plan amendments
Actuarial gain (loss)
Acquisitions
Foreign currency translation
Curtailments/settlements
Associate contributions
Benefit payments
Ending balance

Unrecognized net loss
Unrecognized prior service cost
Accrued benefit liability recognized

2001

2000

$(2,153.7) $(2,124.3)
(19.5)
(164.2)
(3.0)
(75.4)
—
7.5
(3.1)
(2.2)
230.5
(2,153.7)

(17.8)
(183.2)
(150.1)
(138.0)
—
11.6
(6.4)
(4.2)
258.1
(2,383.7)

440.8
119.0

313.5
(23.1)

on the Consolidated Balance Sheet

$(1,823.9) $(1,863.3)

Of the accrued benefit liability recognized, $266.7 million
and $222.0 million was included in current liabilities at
December 31, 2001 and 2000, respectively.

The following table presents significant assumptions used:
INTERNATIONAL

U.S.

2001
Discount rate
Rate of increase in compensation levels

2000
Discount rate
Rate of increase in compensation levels

1999
Discount rate
Rate of increase in compensation levels

7.75%
4.0

8.0%
4.0

7.5%
4.0

7.5%
4.5

7.7%
4.6

8.3%
5.4

A 7.5% annual rate of increase in the cost of health care
benefits for retirees under age 65 and a 7.5% annual rate of
increase for retirees 65 years and older is assumed in respect
of 2002. These rates gradually decrease to 5.0% in 2012 and
remain at that level thereafter. A 1% change in the assumed
health care cost trend would have increased (decreased) the
accumulated benefit obligation at December 31, 2001 and
the aggregate service and interest cost for the year then
ended as follows:

(IN MILLIONS)
Accumulated benefit obligation
Aggregate service and interest cost

1% INCREASE
$ 21.3
2.4

1% DECREASE
$ (19.5)
(2.4)

NOTE 15

PENSIONS
Goodyear and its subsidiaries provide substantially all asso-
ciates with pension benefits. The principal domestic hourly
plan provides benefits based on length of service. The prin-
cipal domestic plans covering salaried associates provide
benefits based on final five-year average earnings formulas.
Associates making voluntary contributions to these plans
receive higher benefits. Other plans provide benefits similar
to the principal domestic plans as well as termination
indemnity plans at certain international subsidiaries.

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

Net periodic pension cost follows:

The following table presents significant assumptions used:

(IN MILLIONS)
Service cost-benefits earned

during the period
Interest cost on projected
benefit obligation

Expected return on plan assets
Amortization of unrecognized:

— prior service cost
— net (gains) losses
— transition amount

2001

2000

1999

$ 110.3

$ 119.6

$ 118.0

377.4
(441.0)

353.0
(470.7)

314.6
(389.2)

84.1
6.8
.6
$ 138.2

69.1
(7.1)
.4
$ 64.3

65.9
14.2
.3
$ 123.8

Goodyear recognized a settlement gain of $1.1 million, a
curtailment gain of $.8 million and a special termination loss
of $25.1 million during 2001. During 2000, Goodyear rec-
ognized a settlement loss of $1.4 million and a curtailment
loss of $1.5 million and a special termination loss of $6.4
million. During 1999, Goodyear recognized a settlement
gain of $12.5 million and a curtailment loss of $6.2 million.
Refer to Note 3.

The following table sets forth the funded status and amounts

recognized on Goodyear’s Consolidated Balance Sheet at
December 31, 2001 and 2000. At the end of 2001 and 2000,
assets exceeded accumulated benefits in certain plans and accu-
mulated benefits exceeded assets in others. Plan assets are invest-
ed primarily in common stocks and fixed income securities.

(IN MILLIONS)
Projected benefit obligation:

Beginning balance
Service cost — benefits earned
Interest cost
Plan amendments
Actuarial gain (loss)
Associate contributions
Divestitures
Curtailments/settlements
Foreign currency translation
Benefit payments

Ending balance

Plan assets

Projected benefit obligation
in excess of plan assets
Unrecognized prior service cost
Unrecognized net loss (gain)
Unrecognized net obligation at transition
Net benefit cost recognized on the
Consolidated Balance Sheet

2001

2000

$(5,051.4) $(4,878.1)
(119.6)
(353.0)
(248.6)
153.8
(23.6)
—
6.7
78.7
332.3
(5,051.4)

(110.3)
(377.4)
(11.1)
(157.6)
(20.2)
2.1
(1.1)
63.6
448.4
(5,215.0)

4,176.2

4,749.6

(1,038.8)
573.4
798.3
4.7

(301.8)
645.7
(10.2)
6.7

$ 337.6

$ 340.4

2001
Discount rate
Rate of increase in compensation levels

U.S.

INTERNATIONAL

7.75% 6.5%
4.0

3.5

Expected long term rate of return on plan assets

10.0

8.5

2000
Discount rate
Rate of increase in compensation levels

Expected long term rate of return on plan assets

1999
Discount rate
Rate of increase in compensation levels

Expected long term rate of return on plan assets

8.0%
4.0

9.5

7.5%
4.3

9.5

6.7%
3.6

8.6

6.8%
3.9

8.8

The following table presents amounts recognized on the
Consolidated Balance Sheet:

(IN MILLIONS)
Prepaid benefit cost

— current
— long term
Accrued benefit cost

2001

2000

$ 159.4
474.2

$ 92.0
549.5

— current
— long term
Intangible asset
Deferred income taxes
Minority shareholders’ equity
Accumulated other comprehensive income
Net benefit cost recognized on the
Consolidated Balance Sheet

(69.1)
(1,146.0)
504.9
136.2
20.7
257.3

(72.7)
(521.5)
259.4
11.8
—
21.9

$ 337.6

$ 340.4

The following table presents changes in plan assets:

(IN MILLIONS)
Beginning balance

Actual return on plan assets
Company contributions
Associate contributions
Settlements
Foreign currency translation
Benefit payments

Ending balance

2001
$4,749.6
(230.6)
186.5
20.2
(48.3)
(52.8)
(448.4)
$4,176.2

2000
$5,178.9
(117.2)
81.0
23.6
(7.8)
(76.6)
(332.3)
$4,749.6

For plans that are not fully funded:

(IN MILLIONS)
Accumulated benefit obligation
Plan assets

2001
$ 3,959.0
3,183.9

2000
$2,487.1
2,239.9

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

Certain international subsidiaries maintain unfunded plans
consistent with local practices and requirements. At
December 31, 2001, these plans accounted for $153.1 mil-
lion of Goodyear’s accumulated benefit obligation, $162.4
million of its projected benefit obligation and $13.4 million
of its minimum pension liability adjustment ($167.7 million,
$177.4 million and $16.7 million, respectively, at
December 31, 2000).

NOTE 16

INCOME TAXES
The components of Income before Income Taxes, adjusted
for Minority Interest in Net Income of Subsidiaries, follow:

(IN MILLIONS)
U.S.
Foreign

Minority Interest in

Net Income of Subsidiaries

2001
$(341.2)
68.2
(273.0)

2000
$(142.3)
201.1
58.8

1999
$ (69.5)
369.6
300.1

.2
$(272.8)

33.5
$ 92.3

40.3
$340.4

A reconciliation of Federal income taxes at the U.S. statuto-
ry rate to income taxes provided follows:

(DOLLARS IN MILLIONS)
U.S. Federal income tax at

the statutory rate of 35%
Adjustment for foreign income
taxed at different rates

Gain on formation of Goodyear
Dunlop Tires Europe B.V.

State income taxes, net of

2001

2000

1999

$(95.5)

$ 32.3

$119.2

(17.3)

(26.0)

(17.7)

—

(56.9)

Federal benefit

(21.1)

(7.4)

(12.7)

Foreign operating loss with no

tax benefit provided

Other
United States and Foreign

69.4
(4.9)

24.8
(5.2)

24.0
1.0

Taxes on Income

$(69.4)

$ 18.5

$ 56.9

Effective tax rate

25.4%

20.0% 16.7%

The components of the provision for income taxes by tax-
ing jurisdiction follow:

(IN MILLIONS)
Current:

Federal
Foreign income and
withholding taxes

State

Deferred:
Federal
Foreign
State

United States and Foreign
Taxes on Income

2001

2000

1999

$ 45.9

$ 2.3

$ 40.7

134.5
2.2

182.6

151.4
3.7

157.4

157.4
(.2)

197.9

(184.4)
(32.9)
(34.7)

(101.4)
(22.6)
(14.9)

(128.5)
6.6
(19.1)

(252.0)

(138.9)

(141.0)

$ (69.4)

$ 18.5

$ 56.9

Temporary differences and carryforwards giving rise to
deferred tax assets and liabilities at December 31, 2001 and
2000 follow:
(IN MILLIONS)
Postretirement benefits
other than pensions

2001

2000

Vacation and sick pay
Items reflected as paid or received
Tax credit and operating loss carryforwards
Capitalized expenditures for tax reporting
Rationalizations and other provisions
Alternative minimum tax credit carryforwards
Other

$ 641.2
68.6
172.0
206.9
341.3
43.3
20.0
126.9

$ 674.6
71.0
102.7
208.4
199.9
37.2
46.7
59.7

Valuation allowance

Total deferred tax assets
Total deferred tax liabilities

— property basis differences
— inventory
— pensions
Total deferred taxes

1,620.2
(257.9)

1,400.2
(224.3)

1,362.3

1,175.9

(444.7)
(61.0)
(20.3)

$ 836.3

(499.3)
(92.3)
(157.8)
$ 426.5

At December 31, 2001, Goodyear had tax credit carryfor-
wards of $3.8 million and $203.1 million of tax assets on
foreign net operating loss carryforwards, some of which are
subject to expiration beginning in 2002. At December 31,
2001, Goodyear had recorded valuation allowances totaling
$257.9 million against these and other deferred tax assets
where recovery of the asset or carryforward is uncertain.

Goodyear made net cash payments for income taxes in
2001, 2000 and 1999 of $50.8 million, $152.7 million and
$204.0 million, respectively.

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

No provision for Federal income tax or foreign with-
holding tax on retained earnings of international subsidiaries
of $1,727 million is required because this amount has been
or will be reinvested in properties and plants and working
capital. It is not practicable to calculate the deferred taxes
associated with the remittance of these investments.

NOTE 17

INTEREST EXPENSE
Interest expense includes interest and amortization of debt
discount and expense, less amounts capitalized as follows:

(IN MILLIONS)
Interest expense before

capitalization
Capitalized interest

2001

2000

1999

$298.8

(6.4)

$292.4

$294.6
(12.0)
$282.6

$191.2
(11.8)
$179.4

Goodyear made cash payments for interest in 2001, 2000
and 1999 of $292.6 million, $261.0 million and $192.8 mil-
lion, respectively.

NOTE 18

RESEARCH AND DEVELOPMENT
Research and development costs for 2001, 2000 and 1999
were $375.5 million, $423.1 million and $438.0 million,
respectively.

NOTE 19

ADVERTISING COSTS
Advertising costs for 2001, 2000 and 1999 were $268.7
million, $249.6 million and $238.2 million, respectively.

NOTE 20

BUSINESS SEGMENTS
Segment information reflects the strategic business units of
Goodyear (SBUs), which are organized to meet customer
requirements and global competition.

The Tire business is comprised of five regional SBUs.
The Engineered and Chemical businesses are each managed
on a global basis. Segment information is reported on the
basis used for reporting to Goodyear’s Chairman of the
Board and Chief Executive Officer.

Each of the five regional tire business segments is

involved in the development, manufacture, distribution and
sale of tires. Certain of the tire business segments also pro-
vide related products and services, which include retreads,
automotive repair services and merchandise purchased
for resale.

North American Tire provides original equipment and
replacement tires for autos, trucks, farm, aircraft and con-
struction applications in the United States, Canada and
export markets. North American Tire also provides related
products and services including tread rubber, tubes, retread-
ed tires, automotive repair services and merchandise pur-
chased for resale.

European Union Tire provides original equipment and
replacement tires for autos, trucks, farm and construction
applications in the European Union, Norway, Switzerland
and export markets. European Union Tire also retreads truck
and aircraft tires.

Eastern Europe, Africa and Middle East Tire provides
replacement tires for autos, trucks and farm applications in
Eastern Europe, Africa, the Middle East and export markets.
The segment also provides original equipment tires to man-
ufacturers in Poland, South Africa, Turkey, Morocco and the
Czech Republic.

Latin American Tire provides original equipment and
replacement tires for autos, trucks, tractors, aircraft and con-
struction applications in Central and South America,
Mexico and export markets. Latin American Tire also manu-
factures materials for tire retreading.

Asia Tire provides original equipment and replacement
tires for autos, trucks, farm, aircraft and construction appli-
cations in Asia and the Western Pacific. Asia Tire also
retreads truck, construction equipment and aircraft tires and
provides automotive repair services.

Engineered Products develops, manufactures and sells
belts, hoses, molded products, airsprings, tank tracks and
other products for original equipment and replacement
transportation applications and industrial markets worldwide.
Chemical Products develops, manufactures and sells

synthetic rubber and rubber latices, and other organic
chemical products for internal and external customers
worldwide. Chemical Products also engages in plantation
and natural rubber purchasing operations.

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

(IN MILLIONS)
SALES
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products

Total Segment Sales

Inter-SBU sales
Other

Net Sales

INCOME
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products

Total Segment Income (EBIT)

Rationalizations and asset sales
Interest expense
Foreign currency exchange
Minority interest in net income of subsidiaries
Inter-SBU income
Other

Income (Loss) before Income Taxes

ASSETS
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products

Total Segment Assets

Corporate
Assets

2001

2000

1999

$ 7,152.3
3,128.0
703.1
1,012.6
493.9
12,489.9

1,122.3
1,037.3
14,649.5

(521.0)
18.7
$14,147.2

$ 107.8
57.2
20.2
89.8
19.9
294.9

11.6
60.2
366.7

(162.4)
(292.4)
(.1)
(.2)
(32.3)
(152.3)
$ (273.0)

$ 4,856.7
2,786.5
747.7
753.9
600.9
9,745.7

681.2
601.6
11,028.5

2,484.4
$13,512.9

$ 7,111.3
3,198.1
793.0
1,047.9
524.6
12,674.9

1,174.2
1,129.7
14,978.8

(567.1)
5.4
$14,417.1

$ 260.7
88.7
54.6
69.8
17.9
491.7

43.1
64.2
599.0

(119.1)
(282.6)
6.7
(33.5)
(28.8)
(82.9)
$ 58.8

$ 5,268.5
3,088.1
903.6
796.5
668.5
10,725.2

736.8
742.9
12,204.9

1,363.1
$13,568.0

$ 6,648.6
2,642.7
812.9
948.1
593.2
11,645.5

1,234.8
949.8
13,830.1

(482.8)
8.1
$13,355.4

$ 26.3
188.0
49.8
67.7
26.0
357.8

70.4
116.4
544.6

(4.9)
(179.4)
27.6
(40.3)
(49.6)
2.1
$ 300.1

$ 5,046.6
3,336.1
897.1
820.7
725.5
10,826.0

712.4
689.6
12,228.0

1,050.1
$13,278.1

Results of operations in the Tire and Engineered Products segments were measured based on net sales to unaffiliated customers and
EBIT. Results of operations of the Chemical Products segment included transfers to other SBUs. Segment EBIT is computed as
follows: net sales less cost of goods sold, less selling, administrative and general expense (excluding corporate administrative
expenses). Inter-SBU sales by Chemical Products were at the lower of a formulated price or market. Purchases from Chemical

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

Products were included in the purchasing SBU’s EBIT at Chemical Products cost. Segment assets include those assets under the
management of the SBU.

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

The following table presents the sales and operating income of Goodyear’s Asia Tire segment together with 100% of the sales

and operating income of SPT:

(IN MILLIONS)
NET SALES

Asia Tire Segment
SPT

OPERATING INCOME (LOSS)
Asia Tire Segment
SPT

2001

2000

1999

$493.9
481.3
$975.2

$ 19.9
(25.4)
$ (5.5)

$ 524.6
563.6
$1,088.2

$ 17.9

(11.1)

$ 6.8

$ 593.2
674.5
$1,267.7

$ 26.0
31.2
$ 57.2

SPT operating losses did not include rationalization charges of approximately $48.0 million in 2001 and $32.2 million in 2000.
SPT debt totaled $67.4 million and $158.1 million at December 31, 2001 and December 31, 2000, respectively.

Portions of the items described in Note 3, Rationalizations and Note 4, Other (Income) and Expense were not charged (credit-

ed) to the SBUs for performance evaluation purposes but were attributable to the SBUs as follows:

(IN MILLIONS)
RATIONALIZATIONS
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products
Total Segments

Corporate

Rationalizations

OTHER (INCOME) AND EXPENSE
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products
Total Segments

Corporate

Other (Income) and Expense

2001

$ 31.6
81.5
11.2
.2
45.4
169.9

1.5
—
171.4

35.4
$206.8

$ —
(17.0)
—
—
—
(17.0)

—
(27.4)
(44.4)

56.2
$ 11.8

G O O D Y E A R 2 0 0 1

– 55 –

2000

1999

$ (.7)
23.3
9.6
65.7
3.3
101.2

3.8
—
105.0

19.1
$ 124.1

$ —
—
—
(5.0)
—
(5.0)

—
—
(5.0)

32.8
$ 27.8

$ 71.5
2.8
.3
77.3
1.5
153.4

8.8
2.5
164.7

6.9
$ 171.6

$ —
(149.7)
—
—
—
(149.7)

—
(17.0)
(166.7)

19.6
$ (147.1)

(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

(IN MILLIONS)
CAPITAL EXPENDITURES
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products

Total Segment Capital Expenditures

Corporate

Capital Expenditures

DEPRECIATION AND AMORTIZATION
North American Tire
European Union Tire
Eastern Europe, Africa and Middle East Tire
Latin American Tire
Asia Tire

Total Tires

Engineered Products
Chemical Products

Total Segment Depreciation and Amortization

Corporate

Depreciation and Amortization

2001

$198.5
71.4
37.7
24.8
16.1
348.5

29.0
26.9
404.4

31.0
$435.4

$286.0
116.5
53.3
28.2
34.0
518.0

34.3
38.7
591.0

45.7
$636.7

2000

$235.4
94.0
43.4
36.6
35.3
444.7

36.7
76.7
558.1

56.4
$614.5

$270.0
111.7
49.3
35.9
38.2
505.1

34.4
39.4
578.9

51.4
$630.3

1999

$372.8
106.2
46.9
50.6
38.0
614.5

54.6
90.4
759.5

45.5
$805.0

$219.7
91.8
48.6
34.2
40.5
434.8

44.2
35.8
514.8

66.9
$581.7

The following table presents geographic information. Net sales by country were determined based on the location of the selling
subsidiary. Long-lived assets consisted primarily of properties and plants, deferred charges and other miscellaneous assets.
Management did not consider the net sales or long-lived assets of individual countries outside the United States to be significant
to the consolidated financial statements.

(IN MILLIONS)
Net Sales
United States
International

LONG-LIVED ASSETS
United States
International

2001

2000

1999

$ 7,655.8
6,491.4
$14,147.2

$ 4,317.7
2,923.8
$ 7,241.5

$ 7,611.1
6,806.0
$14,417.1

$ 4,188.5
3,166.3
$ 7,354.8

$ 7,136.6
6,218.8
$13,355.4

$ 4,080.1
3,290.2
$ 7,370.3

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

NOTE 21

ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of Accumulated Other Comprehensive
Income follow:

(IN MILLIONS)
Foreign currency translation

adjustment

Minimum pension liability adjustment
Unrealized investment loss
Deferred derivative loss

2001

2000

$ (1,450.2) $ (1,273.9)
(21.9)
(10.0)
—
$ (1,737.3) $ (1,305.8)

(257.3)
(16.6)
(13.2)

NOTE 22

COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 2001, Goodyear had binding commit-
ments for investments in land, buildings and equipment of
$121.5 million, and off-balance-sheet financial guarantees
written and other commitments totaling $151.4 million.

At December 31, 2001, Goodyear had recorded liabili-
ties aggregating $66.5 million for anticipated costs related
to various environmental matters, primarily the remediation
of numerous waste disposal sites and certain properties sold
by Goodyear. These costs include legal and consulting fees,
site studies, the design and implementation of remediation
plans, post-remediation monitoring and related activities
and will be paid over several years. The amount of
Goodyear’s ultimate liability in respect of these matters may
be affected by several uncertainties, primarily the ultimate
cost of required remediation and the extent to which other
responsible parties contribute. Refer to Environmental
Cleanup Matters at Note 1.

At December 31, 2001, Goodyear had recorded liabili-
ties aggregating $218.7 million for potential product liabili-
ty and other tort claims, including related legal fees expect-
ed to be incurred, presently asserted against Goodyear. The
amount recorded was determined on the basis of an assess-
ment of potential liability using an analysis of available
information with respect to pending claims, historical expe-
rience and, where available, current trends.

Goodyear is a defendant in numerous lawsuits involving

at December 31, 2001, approximately 63,000 claimants
alleging various asbestos related personal injuries purported
to result from exposure to asbestos in certain rubber coated
products manufactured by Goodyear in the past or in cer-
tain Goodyear facilities. Typically, these lawsuits have been
brought against multiple defendants in state and Federal

courts. In the past, Goodyear has disposed of approximately
22,000 cases by defending and obtaining the dismissal
thereof or by entering into a settlement. Goodyear has poli-
cies and coverage-in-place agreements with certain of its
insurance carriers that cover a substantial portion of estimat-
ed indemnity payments and legal fees in respect of the
pending claims. At December 31, 2001, Goodyear has
recorded an asset in the amount it expects to collect under
the policies and coverage-in-place agreements with certain
carriers related to its estimated asbestos liability. Goodyear
has also commenced discussions with certain of its excess
coverage insurance carriers to establish arrangements in
respect of their policies.

The portion of the recorded liabilities for potential prod-
uct liability and other tort claims relating to asbestos claims
is based on pending claims. The amount recorded reflects
an estimate of the cost of defending and resolving pending
claims, based on available information and our experience in
disposing of asbestos claims in the past. The estimated lia-
bility of Goodyear is not discounted or reduced for possible
recoveries from insurance carriers. No liability has been
recorded for unknown asbestos claims, and Goodyear can-
not predict the number of future claims, the cost of dispos-
ing of existing and future claims, or the future ability to
recover from insurance carriers.

The Company is a defendant in three class actions and
twenty other civil actions in various Federal and state courts
alleging, among other things, breaches of warranties and
defects in the Company’s Entran II hose installed as a part of
Heatway radiant heating systems in the homes or other
structures of the claimants. On February 25, 2002, a jury in
a civil action in a Colorado State Court found, among other
things, that the Company’s Entran II hose installed in five
homesites was defective and awarded plaintiffs $5.9 million
in damages, which are trebled under the Colorado
Consumer Protection Act, plus interest, attorney’s fees and
costs, for a total award of approximately $20 million. The
Company continues to believe the hose was not defective.
The Company believes the verdict was based on material
errors of fact and law and will appeal. A jury in a civil action
between the Company and Heatway in Federal District
Court in Cleveland, Ohio, found that the Company did not
breach the implied warranty of merchantability in respect of
Entran II hose sold to Heatway for installation in radiant
heating systems and that the hose was fit for use in the sys-
tems and the court, on February 4, 2000, dismissed all
claims of Heatway regarding the Entran II hose.

G O O D Y E A R 2 0 0 1

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(CONTINUED)

N O T E S T O F I N A N C I A L S T A T E M E N T S

Subject to the uncertainties referred to above, Goodyear
has concluded that in respect of any of the above described
liabilities, it is not reasonably possible that it would incur a
loss exceeding the amount recognized at December 31,
2001 with respect thereto which would be material relative
to the consolidated financial position, results of operations
or liquidity of Goodyear.

Various other legal actions, claims and governmental
investigations and proceedings covering a wide range of
matters are pending against Goodyear and its subsidiaries.
Management, after reviewing available information relating
to such matters and consulting with Goodyear’s General
Counsel, has determined with respect to each such matter
either that it is not reasonably possible that Goodyear has
incurred liability in respect thereof or that any liability ulti-
mately incurred will not exceed the amount, if any, recorded
at December 31, 2001 in respect thereof which would be
material relative to the consolidated financial position,
results of operations or liquidity of Goodyear. However, in
the event of an unanticipated adverse final determination in
respect of certain matters, Goodyear’s consolidated net
income for the period in which such determination occurs
could be materially affected.

NOTE 23

PREFERRED STOCK PURCHASE RIGHTS PLAN
In June 1996, the Company authorized 7,000,000 shares of
Series B Preferred Stock (“Series B Preferred”) issuable only
upon the exercise of rights (“Rights”) issued under the
Preferred Stock Purchase Rights Plan adopted on, and set
forth in the Rights Agreement dated, June 4, 1996. Each
share of Series B Preferred issued would be non-redeemable,

non-voting and entitled to (i) cumulative quarterly divi-
dends equal to the greater of $25.00 or, subject to adjust-
ment, 100 times the per year amount of dividends declared
on Goodyear Common Stock (“the Common Stock”) during
the preceding quarter and (ii) a liquidation preference.

Under the Rights Plan, each shareholder of record on
July 29, 1996 received a dividend of one Right per share of
the Common Stock. Each Right, when exercisable, will enti-
tle the registered holder thereof to purchase from the
Company one one-hundredth of a share of Series B Preferred
Stock at a price of $250 (the “Purchase Price”), subject to
adjustment. The Rights will expire on July 29, 2006, unless
earlier redeemed at $.001 per Right. The Rights will be exer-
cisable only in the event that an acquiring person or group
purchases, or makes — or announces its intention to make —
a tender offer for, 15% or more of the Common Stock. In
the event that any acquiring person or group acquires 15%
or more of the Common Stock, each Right will entitle the
holder to purchase that number of shares of Common Stock
(or in certain circumstances, other securities, cash or proper-
ty) which at the time of such transaction would have a mar-
ket value of two times the Purchase Price.

If the Company is acquired or a sale or transfer of 50%
or more of the Company’s assets or earnings power is made
after the Rights become exercisable, each Right (except
those held by an acquiring person or group) will entitle the
holder to purchase common stock of the acquiring entity
having a market value then equal to two times the Purchase
Price. In addition, when exercisable the Rights under certain
circumstances may be exchanged by the Company at the
ratio of one share of Common Stock (or the equivalent
thereof in other securities, property or cash) per Right, sub-
ject to adjustment.

G O O D Y E A R 2 0 0 1

– 58 –

S U P P L E M E N T A R Y D A T A (UNAUDITED)

QUARTERLY DATA AND MARKET PRICE INFORMATION

(IN MILLIONS, EXCEPT PER SHARE)
2001
Net Sales
Gross Profit
Net Income (Loss)

Net Income (Loss) Per Share — Basic

— Diluted

Average Shares Outstanding — Basic

— Diluted

Price Range of Common Stock: *

High
Low

Dividends Per Share

FIRST
$3,414.2
628.6
(46.7)

(.30)
(.30)

158.2
158.2

$ 27.32
22.72
.30

QUARTER

SECOND
$3,582.5
670.4
$ 7.8

.05
.05

158.8
161.2

$ 30.40
22.80
.30

THIRD
$3,677.9
683.6
$ 9.3

.06
.06

159.9
161.6

$ 31.64
17.72
.30

FOURTH
$3,472.6
545.1
$ (174.0)

$ (1.07)
(1.07)

163.1
163.1

YEAR
$14,147.2
2,527.7
$ (203.6)

(1.27)
(1.27)

160.0
160.0

$ 25.28
17.85
.12

$ 31.64
17.72
1.02

The first quarter included a net after-tax charge of $57.1 million or $.36 per share for rationalizations and an after-tax gain of
$13.9 million or $.09 per share from asset sales. The fourth quarter included a net after-tax charge of $101.2 million or $.62 per
share for rationalizations and an after-tax gain of $16.9 million or $.10 per share from asset sales.

Quarterly per share amounts do not add to the year 2001 per share amount due to issuance of 4.3 million shares of common

stock in the third quarter.

(IN MILLIONS, EXCEPT PER SHARE)
2000
Net Sales
Gross Profit
Net Income (Loss)

Net Income (Loss) Per Share — Basic

— Diluted

Average Shares Outstanding — Basic

— Diluted

Price Range of Common Stock: *

High
Low

Dividends Per Share

FIRST
$3,664.1
730.1
$ 48.2

.31
.30

156.3
158.7

$ 29 1/8
20 3/8
.30

QUARTER

SECOND
$3,607.3
756.7
77.1

.49
.49

156.4
158.7

$ 31 5/8
19 3/4
.30

THIRD
$3,619.3
650.5
$ 17.0

.11
.11

157.0
158.2

$ 26 3/4
17 1/4
$ .30

FOURTH
$3,526.4
642.5
$ (102.0)

$ (.65)
(.65)

157.6
157.6

YEAR
$14,417.1
2,779.8
$ 40.3

.26
.25

156.8
158.8

$ 24.09
15.60
.30

$ 31 5/8
15.60
1.20

The second quarter included a net after-tax charge of $5.2 million or $.03 per share for rationalizations. The third quarter included
an after-tax gain of $3.2 million or $.02 per share from asset sales and an after-tax charge of $1.2 million or $.01 per share for
rationalizations. The fourth quarter included an after-tax charge of $93.7 million or $.59 per share for rationalizations.
Per share amounts of unusual items are diluted.

*New York Stock Exchange — Composite Transactions

G O O D Y E A R 2 0 0 1

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C O M P A R I S O N W I T H P R I O R Y E A R S

(DOLLARS IN MILLIONS, EXCEPT PER SHARE)

2001

2000

1999

1998

1997

FINANCIAL RESULTS
Net Sales

Income (Loss) from Continuing Operations
Discontinued Operations
Net Income (Loss)

PER SHARE OF COMMON STOCK — BASIC:
Income (Loss) from Continuing Operations
Discontinued Operations
Net Income (Loss)

$14,147.2

$14,417.1

$13,355.4

$13,081.6

$13,502.0

(203.6)
—
(203.6)

(1.27)
—
(1.27)

40.3
—
40.3

.26
—
.26

243.2
—
243.2

1.55
—
1.55

672.2
(34.7)
637.5

4.29
(.22)
4.07

497.4
36.3
533.7

3.18
.24
3.42

Average Shares Outstanding — Basic

159,955,869

156,840,646

156,182,004

156,570,476

156,225,112

PER SHARE OF COMMON STOCK — DILUTED:
Income (Loss) from Continuing Operations
Discontinued Operations
Net Income (Loss)

Average Shares Outstanding — Diluted
Cash Dividends

FINANCIAL POSITION
Assets

Properties and Plants — Net
Depreciation
Capital Expenditures
Long Term Debt
Shareholders’ Equity

OTHER INFORMATION
Shareholders of Record
Price Range of Common Stock: *

High
Low

Average Number of Associates

(1.27)
—
(1.27)

.25
—
.25

1.53
—
1.53

4.25
(.22)
4.03

3.14
.23
3.37

159,955,869
1.02

158,764,926
1.20

158,939,599
1.20

158,307,212
1.20

158,169,534
$ 1.14

$13,512.9

$13,568.0

$13,278.1

$10,762.7

$10,135.6

5,116.1
596.4
435.4
3,203.6
2,864.0

5,521.0
593.6
614.5
2,349.6
3,503.0

5,761.0
557.6
805.0
2,347.9
3,792.6

4,358.5
487.8
838.4
1,186.5
3,919.2

4,149.7
453.9
699.0
844.5
3,613.7

27,822

28,778

28,163

28,348

29,198

$ 31.64
17.72
100,779

$ 31 5/8
15.60
106,724

$ 66 3/4
25 1/2
100,649

$ 76 3/4
45 7/8
96,950

$ 71 1/4
49 1/4
95,472

2001 included a net after-tax charge of $170.1 million or $1.06 per share for rationalizations, the sale of the specialty chemical business, asset sales, costs related to a tire replace-
ment program and rationalization costs at Goodyear’s SPT equity investment.
2000 included a net after-tax charge of $63.0 million or $.40 per share for rationalizations, asset sales, change in Goodyear’s domestic inventory costing method from LIFO to FIFO
and rationalization costs at Goodyear’s SPT equity investment.
1999 included a net after-tax benefit of $22.3 million or $.13 per share for rationalizations and asset sales.
1998 included a net after-tax gain totaling $61.3 million or $.38 per share from rationalizations, the sale of the Oil Transportation business segment and other asset sales.
1997 included an after-tax charge of $176.3 million or $1.12 per share for rationalizations.
All per share amounts are diluted unless otherwise noted.
* New York Stock Exchange — Composite Transactions

G O O D Y E A R 2 0 0 1

– 60 –

R E P O R T O F M A N A G E M E N T

R E P O R T O F I N D E P E N D E N T
A C C O U N T A N T S

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE GOODYEAR TIRE & RUBBER COMPANY
In our opinion, the accompanying consolidated balance
sheet and the related consolidated statements of income,
shareholders’ equity and cash flows present fairly, in all
material respects, the financial position of The Goodyear
Tire & Rubber Company and Subsidiaries at December 31,
2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting princi-
ples generally accepted in the United States of America.
These financial statements are the responsibility of the
Company’s management; our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United
States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant esti-
mates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

Cleveland, Ohio
February 4, 2002

The financial statements of The Goodyear Tire & Rubber
Company and Subsidiaries were prepared in conformity
with accounting principles generally accepted in the United
States of America. Management is responsible for selection
of appropriate accounting principles and the objectivity and
integrity of the data, estimates and judgments that are the
basis for the financial statements.

Goodyear has established and maintains a system of
internal controls designed to provide reasonable assurance
that the books and records reflect the transactions of the
Company and that its established policies and procedures
are carefully followed. This system is based upon the world-
wide communication and implementation of written proce-
dures, policies and guidelines, organizational structures that
provide an appropriate division of responsibility, a program
of internal audit and the careful selection, training and
development of operating and financial management.

PricewaterhouseCoopers LLP, independent accountants,

examined the financial statements and their report is pre-
sented on this page. Their opinion is based on an examina-
tion that provides an independent, objective review of the
way Goodyear fulfills its responsibility to publish statements
that present fairly the financial position and operating
results. They obtain and maintain an understanding of the
Company’s internal accounting and reporting controls, test
transactions and perform related auditing procedures as they
consider necessary to arrive at an opinion on the fairness of
the financial statements. While the independent account-
ants make extensive reviews of procedures, it is neither
practicable nor necessary for them to test a large portion of
the daily transactions.

The Board of Directors pursues its oversight responsibili-
ty for the financial statements through its Audit Committee,
composed of Directors who are not associates of the
Company. The Committee meets periodically with the
independent accountants, representatives of management
and internal auditors to assure that all are carrying out their
responsibilities. To assure independence,
PricewaterhouseCoopers LLP and the internal auditors have
full and free access to the Audit Committee, without
Company representatives present, to discuss the results of
their examinations and their opinions on the adequacy of
internal controls and the quality of financial reporting.

Samir G. Gibara
Chairman & Chief Executive Officer

Robert W. Tieken
Executive Vice President & Chief Financial Officer

G O O D Y E A R 2 0 0 1

– 61 –

B O A R D O F D I R E C T O R S A N D O F F I C E R S

BOARD OF DIRECTORS

John G. Breen
Retired Chairman of the Board,
The Sherwin-Williams Company
Elected 1992 1, 2

William E. Butler
Retired Chairman of the Board & Chief
Executive Officer, Eaton Corporation
Elected 1995 1, 3

Thomas H. Cruikshank
Retired Chairman of the Board & Chief
Executive Officer, Halliburton Company
Elected 1986 1, 3

Edward T. Fogarty
Retired Chairman of the Board, President
& Chief Executive Officer, Tambrands Inc.
Elected 2000 3, 4

Samir G. Gibara
Chairman of the Board & Chief Executive
Officer, The Goodyear Tire & Rubber Company
Elected 1995

William J. Hudson Jr.
Retired Vice Chairman of the Board,
AMP Incorporated
Elected 1995 1, 2, 4

Robert J. Keegan
President & Chief Operating Officer,
The Goodyear Tire & Rubber Company
Elected 2000

Philip A. Laskawy
Retired Chairman of the Board & Chief
Executive Officer, Ernst & Young
Elected 2001 1, 3

Steven A. Minter
Executive Director & President,
The Cleveland Foundation
Elected 1985 2, 3, 4

Agnar Pytte
Retired President,
Case Western Reserve University
Elected 1988 2, 3, 4

Martin D. Walker
Retired Chairman of the Board & Chief
Executive Officer, M. A. Hanna Company
Elected 1997 2, 3, 4

Kathryn D. Wriston
Director or Trustee of various organizations
Elected 2002

James M. Zimmerman
Chairman of the Board & Chief Executive
Officer, Federated Department Stores
Elected 2001 2, 4

CORPORATE OFFICERS

Samir G. Gibara, 62*
Chairman of the Board &
Chief Executive Officer
35 years of service, officer since 1992

Robert J. Keegan, 54*
President & Chief Operating Officer
One year of service, officer since 2000

Robert W. Tieken, 62
Executive Vice President & Chief
Financial Officer
Seven years of service, officer since 1994

SENIOR VICE PRESIDENTS

Stephanie W. Bergeron, 48
Senior Vice President,
Corporate Financial Operations
& Treasurer
Three years of service, officer since 1999

Vernon L. Dunckel, 63
Senior Vice President,
Global Product Supply
40 years of service, officer since 1999

Joseph M. Gingo, 57
Senior Vice President, Technology
& Global Products Planning
35 years of service, officer since 1996

C. Thomas Harvie, 58
Senior Vice President, General
Counsel & Secretary
Six years of service, officer since 1995

Clark E. Sprang, 59
Senior Vice President, Business
Development & Integration
35 years of service, officer since 1996

VICE PRESIDENTS

Eric A. Berg, 39
Vice President, E-Commerce
& Chief Information Officer
Two years of service, officer since 2000

Cathryn M. Fischer, 40
Vice President & Chief Marketing Officer
Eleven months of service, officer since 2001

Donald D. Harper, 55
Vice President, Human Resources
Planning, Development & Change
33 years of service, officer since 1998

William M. Hopkins, 57
Vice President, Global Products
Marketing & Technology Planning
34 years of service, officer since 1998

G O O D Y E A R 2 0 0 1

– 62 –

Isabel H. Jasinowski, 53
Vice President, Government Relations
20 years of service, officer since 2001

Richard J. Kramer, 38
Vice President, Corporate Finance
Two years of service, officer since 2000

Gary A. Miller, 55
Vice President, Purchasing
34 years of service, officer since 1992

Bertram Bell, 50
Assistant Secretary & Associate
General Counsel
19 years of service, officer since 2000

Anthony E. Miller, 51
Assistant Secretary & Associate
General Counsel
16 years of service, officer since 2000

BUSINESS UNIT OFFICERS

Christopher W. Clark, 50
President, Latin America Region
28 years of service, officer since 2000

Jarro F. Kaplan, 54
President, Eastern Europe,
Africa & Middle East Region
32 years of service, officer since 2001

Hugh D. Pace, 50
President, Asia Region
27 years of service, officer since 1998

John C. Polhemus, 57
President, North American Tire
32 years of service, officer since 1996

Jonathan D. Rich, 46
President, Chemical Products
One year of service, officer since 2001

Michael J. Roney, 47
President, European Union Region
20 years of service, officer since 1999

Timothy R. Toppen, 46
President, Engineered Products
23 years of service, officer since 2000

John W. Richardson, 57
Vice President, Finance,
North American Tire
34 years of service, officer since 1996

1 Audit Committee
2 Compensation Committee
3 Committee on Corporate Responsibility
4 Nominating and Board Governance Committee

* Also a director

NORTH AMERICA

United States
Akron, Ohio

World headquarters, North American Tire head-
quarters, Asia Tire headquarters, Latin America
Tire headquarters, Chemical Products headquar-
ters, Engineered Products headquarters, technical
center, racing tires, chemicals, tire proving
grounds, global purchasing, airship operations,
research and development facilities

Asheboro, North Carolina Steel tire cord
Bayport, Texas Chemicals
Beaumont, Texas

Synthetic rubber, hydrocarbon resins
Carson, California Airship operations
Cartersville, Georgia Textiles
Danville, Virginia Tires
Decatur, Alabama Textiles
Fayetteville, North Carolina Tires
Freeport, Illinois Tires
Gadsden, Alabama Tires
Green, Ohio Technical center
Hannibal, Missouri Hose products
Houston, Texas Synthetic rubber
Huntsville, Alabama Tires, tire proving grounds
Lawton, Oklahoma Tires
Lincoln, Nebraska Power transmission belts,

hose products, technical center

Marysville, Ohio Conveyor belts, technical center
Mount Pleasant, Iowa Hose products
Niagara Falls, New York Chemicals
Norfolk, Nebraska Hose products
Pompano Beach, Florida Airship operations
Radford, Virginia Tread rubber
St. Marys, Ohio Molded rubber products,
military track, rubber track, technical center

San Angelo, Texas Tire proving grounds
Social Circle, Georgia Tread rubber
Spartanburg, South Carolina Tread rubber
Spring Hope, North Carolina Conveyor belts
Statesville, North Carolina Tire molds
Stow, Ohio Tire molds
Sun Prairie, Wisconsin Hose products
Tonawanda, New York Tires
Topeka, Kansas Tires
Tyler, Texas Tires
Union City, Tennessee Tires
Utica, New York Textiles
West Amherst, New York Goodyear Dunlop

Tires North America headquarters

G O O D Y E A R W O R L D W I D E

Canada
Bowmanville, Ontario Conveyor belts
Collingwood, Ontario Hose products
Granby, Quebec Hose products
Medicine Hat, Alberta Tires
Napanee, Ontario Tires
Owen Sound, Ontario Power transmission belts
Quebec City, Quebec Molded rubber products
Valleyfield, Quebec Tires

EUROPE

Belgium
Brussels Goodyear Dunlop Tires Europe headquar-
ters; European Union Tire headquarters; Eastern
Europe, Africa & Middle East Tire headquarters

France
Amiens Tires
Mireval Tire proving grounds
Montlucon Tires, air springs

Germany
Fulda Tires
Fuerstenwalde Tires
Hanau Tires
Philippsburg Tires
Riesa Tires
Wittlich Tires, tire proving grounds

Luxembourg
Colmar-Berg Tires, textiles, steel tire cord, tire
molds, technical center, tire proving grounds

Poland
Debica Tires, tubes

Slovenia
Kranj Tires, power transmission belts, air springs

Turkey
Adapazari Tires
Izmit Tires

United Kingdom
Birmingham Racing tires
Washington Tires
Wolverhampton Tires

LATIN AMERICA

Brazil
Americana Tires, textile preparation, films, tire

proving grounds
Osasco Hose products
Santa Barbara Tread rubber
Sao Paulo Tires, tire molds, conveyor belts, power

transmission belts, hose products

Sertaozinho Air springs

Chile
Santiago Tires, batteries, conveyor belts,

hose products

Colombia
Cali Tires

G O O D Y E A R 2 0 0 1

– 63 –

Guatemala
Guatemala City Tires
Mexico
Chihuahua Molded rubber products,

power transmission belts

San Luis Potosi Air springs, hose products
Peru
Lima Tires
Venezuela
Tinaquillo Hose products, power transmission belts
Valencia Tires

AFRICA
Morocco
Casablanca Tires
South Africa
Uitenhage Tires, conveyor belts,

power transmission belts

United Arab Emirates
Dubai Regional tire sales and distribution

ASIA
China
Dalian Tires
Qingdao Hose products
India
Aurangabad Tires
Ballabgarh Tires
Indonesia
Aek Tarum Estate Rubber plantation operations
Bogor Tires
Dolok Merangir Estate Rubber plantation

operations

Japan
Tatsuno Tires
Malaysia
Kuala Lumpur Tires
New Zealand
Upper Hutt Tires*
Philippines
Las Pinas Tires
Singapore
Singapore Natural rubber purchasing, testing and

research laboratory

Taiwan
Taipei Tires
Thailand
Bangkok Tires

AUSTRALIA
Footscray Tires*
Bayswater Conveyor belts
Somerton Tires*
Thomastown Tires*

* 50-50 Joint Ventures

S H A R E H O L D E R I N F O R M A T I O N

CORPORATE OFFICES
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001
(330) 796-2121
www.goodyear.com

GOODYEAR COMMON STOCK
The principal market for Goodyear common stock is
the New York Stock Exchange (symbol GT). The stock
is also listed on the Chicago Stock Exchange and The
Pacific Exchange.

On February 15, 2002, there were 29,836 shareholders
of record of Goodyear common stock. The closing price of
Goodyear common stock on the NYSE composite transac-
tions tape on February 15, 2002, was $24.68.

ANNUAL MEETING
10 a.m., Monday, April 15, 2002, at the Corporate Offices.

SHAREHOLDER INQUIRIES
Transfer Agent and Registrar:

EquiServe Trust Company, N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(800) 317-4445
www.equiserve.com

Inquiries concerning the issuance or transfer of stock
certificates, the status of dividend checks or share account
information should be directed to EquiServe Trust
Company, N.A. Provide Social Security number, account
number and Goodyear’s ID number, 5721.

Hearing-impaired shareholders can communicate directly

with EquiServe via a TDD by calling (201) 222-4955.
Other shareholder inquiries should be directed to:

Investor Relations, Dept. 635
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001
(330) 796-3751
E-mail: goodyear.investor.relations@goodyear.com

PUBLICATIONS
The Company’s Form 10-K Annual Report to the Securities
and Exchange Commission for 2001 will be available in
March. The Form 10-Q Quarterly Reports to the Securities
and Exchange Commission during 2002 will be available in
May, August and November.

Copies of any of the above or the Company’s Proxy
Statement may be obtained without charge by writing:

Investor Relations, Dept. 635
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001

or by calling our Financial Report Distribution Center at:

(515) 263-6408

CASSETTE RECORDING
An audio cassette recording of the 2001 Annual Report is
available for visually impaired shareholders by contacting
Goodyear Investor Relations at (330) 796-7142.

DIRECTSERVICETM INVESTMENT PROGRAM
EquiServe Trust Company, N.A. sponsors and administers a
DirectSERVICE Investment Program for current sharehold-
ers and new investors in Goodyear common stock. The pro-
gram offers automatic dividend reinvestment and a variety
of other services. A brochure explaining the program may
be obtained by contacting:

The DirectSERVICE Investment Program —
For Goodyear Shareholders
EquiServe Trust Company, N.A.
P. O. Box 2598
Jersey City, NJ 07303-2598
(800) 317-4445

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
BP Tower
200 Public Square, 27th Floor
Cleveland, Ohio 44114-2301

ENVIRONMENTAL REPORT
A report pertaining to Goodyear’s environmental policies
and activities may be obtained by contacting Goodyear
Corporate Environmental Engineering at (330) 796-7377.

G O O D Y E A R 2 0 0 1

– 64 –

Dear Shareholder:

We are pleased that you have chosen Goodyear as part of
your investment portfolio. I hope you also will avail your-
self of this opportunity to use our quality products. This
coupon entitles you to a 10 percent discount on a selection
of the finest passenger and light truck tires available today.
If you do not need tires at this time, feel free to pass the
coupon along to a neighbor or friend.

Sincerely,

Samir G. Gibara
CHAIRMAN & CHIEF EXECUTIVE OFFICER

10%SHAREHOLDER DISCOUNT

Purchase up to four (4)
Goodyear Aquatred 3, Eagle, Fortera, Ultra Grip
or Wrangler tires at a participating
Goodyear Gemini retailer
or JustTires location
and receive a 10 percent discount.

Valid on purchases made through 2/15/2003.
This coupon may not be reproduced or
combined with any other offer.

For the location of the participating retailer nearest you,
call 1-800-GOODYEAR or go to
www.goodyeardealers.com on the Internet.

STORE MANAGER: KEY IN DIRECT MAIL CODE AR01

THE GOODYEAR TIRE & RUBBER COMPANY
1144 East Market Street
Akron, Ohio 44316-0001
www.goodyear.com

Trademarks or service marks owned by or licensed to The Goodyear
Tire & Rubber Company or its subsidiaries mentioned in this report
include: , Goodyear, Dunlop, Fulda, Kelly, Pneumant,
Aquatred, Aquatred 3, BioTRED, DT824, Eagle, Eagle F1 GS-D3,
Eagle Pd, Fortera, Gemini, GPS 3, GT3, Integrity, JustTires,
PowerMark APR, SP Sport A2, Ultra Grip, UltraTorque
and Wrangler.

This report is printed on recycled paper.

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