GOODYEAR TIRE & RUBBER CO /OH/ FORM 10-K (Annual Report) Filed 02/08/17 for the Period Ending 12/31/16 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 1144 E MARKET ST AKRON, OH 44316 2167962121 0000042582 GT 3011 - Tires and Inner Tubes Tires & Rubber Products Consumer Cyclicals 12/31 http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 Commission File Number: 1-1927 THE GOODYEAR TIRE & RUBBER COMPANY (Exact name of registrant as specified in its charter) Ohio 34-0253240 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 200 Innovation Way, Akron, Ohio (Address of Principal Executive Offices) Registrant’s telephone number, including area code: (330) 796-2121 44316-0001 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Which Registered Title of Each Class Common Stock, Without Par Value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None In dicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ The aggregate market value of the common stock held by nonaffiliates of the registrant, computed by reference to the last sales price of such common stock as of the closing of trading on June 30, 2016, was approximately $6.7 billion. Shares of Common Stock, Without Par Value, outstanding at January 31, 2017: 251,652,040 DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 10, 2017 are incorporated by reference in Part III. Table of Contents THE GOODYEAR TIRE & RUBBER COMPANY Annual Report on Form 10-K For the Fiscal Year Ended December 31, 2016 Table of Contents Item Number Page Number PART I 1 Business 1 1A Risk Factors 10 1B Unresolved Staff Comments 17 2 Properties 17 3 Legal Proceedings 18 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19 6 Selected Financial Data 20 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 7A Quantitative and Qualitative Disclosures About Market Risk 48 8 Financial Statements and Supplementary Data 50 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 117 9A Controls and Procedures 117 9B Other Information 117 10 Directors, Executive Officers and Corporate Governance 117 11 Executive Compensation 118 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 118 13 Certain Relationships and Related Transactions, and Director Independence 118 14 Principal Accountant Fees and Services 118 PART II PART III PART IV 15 Exhibits and Financial Statement Schedules 118 16 Form 10-K Summary 118 Signatures 119 Index to Financial Statement Schedules FS-1 Index of Exhibits X-1 Table of Contents PART I. ITEM 1. BUSINESS. BUSINESS OF GOODYEAR The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 200 Innovation Way, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear,” “Company” and “we,” “us” or “our” wherever used herein refer to the Company together with all of its consolidated U.S. and foreign subsidiary companies, unless the context indicates to the contrary. We are one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. In 2016 , our net sales were $15,158 million and Goodyear’s net income and net income available to common shareholders were $1,264 million . Together with our U.S. and international subsidiaries, we develop, manufacture, market and distribute tires for most applications. We also manufacture and market rubber-related chemicals for various applications. We are one of the world’s largest operators of commercial truck service and tire retreading centers. In addition, we operate approximately 1,100 tire and auto service center outlets where we offer our products for retail sale and provide automotive repair and other services. We manufacture our products in 48 manufacturing facilities in 21 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 66,000 full-time and temporary associates worldwide. Dissolution of Global Alliance with Sumitomo Rubber Industries On October 1, 2015, we completed the previously announced dissolution of our global alliance with Sumitomo Rubber Industries, Ltd. (“SRI”) in accordance with the terms and conditions set forth in the Framework Agreement, dated as of June 4, 2015, by and between the Company and SRI. Under the global alliance, we owned 75% and SRI owned 25% of two companies, Goodyear Dunlop Tires Europe B.V. (“GDTE”) and Goodyear Dunlop Tires North America, Ltd. (“GDTNA”). In Japan, we owned 25% and SRI owned 75% of two companies, one, Nippon Goodyear Ltd. (“NGY”), for the sale of Goodyear-brand passenger and truck tires for replacement in Japan and the other, Dunlop Goodyear Tires Ltd. (“DGT”), for the sale of Goodyear-brand and Dunlop-brand tires to vehicle manufacturers in Japan. We also owned 51%, and SRI owned 49%, of a company that coordinated and disseminated both commercialized tire technology and non-commercialized technology among us and SRI, the joint ventures and their respective affiliates (the “Technology JV”), and we owned 80%, and SRI owned 20%, of a global purchasing company (the “Purchasing JV”). The global alliance also provided for the investment by us and SRI in the common stock of the other. As result of the completion of the transactions contemplated by the Framework Agreement: • we acquired SRI’s 25% interest in GDTE and SRI’s 75% interest in NGY; • we sold to SRI our 75% interest in GDTNA, as well as the Huntsville, Alabama test track used by GDTNA, and our 25% interest in DGT; • we maintained control of the Dunlop-related trademarks for tire-related businesses in North America but granted to SRI an exclusive license to develop, manufacture and sell Dunlop-brand tires for motorcycles and for Japanese-owned original equipment manufacturers operating in North America; • SRI obtained exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa; • we liquidated the Technology JV and Purchasing JV and distributed the remaining assets and liabilities of those entities to us and SRI in accordance with our respective ownership interests; and • we sold our investment in the common stock of SRI resulting in total proceeds of $47 million and a pre-tax gain of $30 million. We paid to SRI a net amount of $271 million and delivered a promissory note to GDTNA in the initial principal amount of $56 million at an interest rate of LIBOR plus 0.1% and with a maturity date three years following the date of dissolution. Deconsolidation of our Venezuelan Subsidiary Effective December 31, 2015, we concluded that we did not meet the accounting criteria for control over our Venezuelan subsidiary. We deconsolidated the operations of our Venezuelan subsidiary and began reporting their results using the cost method of accounting. Our financial results for 2016 do not include the operating results of our Venezuelan subsidiary. Refer to the Note to the Consolidated Financial Statements No. 1, Accounting Policies. AVAILABLE INFORMATION We make available free of charge on our website, http://www.goodyear.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we file or furnish such reports to the Securities and Exchange Commission (the “SEC”). The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K. 1 Table of Contents DESCRIPTION OF GOODYEAR’S BUSINESS G ENERAL I NFORMATION R EGARDING O UR S EGMENTS For the year ended December 31, 2016 , we operated our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific. Financial information related to our operating segments for the three year period ended December 31, 2016 appears in the Note to the Consolidated Financial Statements No. 8, Business Segments. Effective January 1, 2016, we combined our former North America and Latin America strategic business units into one Americas strategic business unit. We have combined the North America and Latin America reportable segments effective on this date to align with the new organizational structure and the basis used for reporting to our Chief Executive Officer. This 2016 Form 10-K reflects the new segment structure with prior periods recast for comparable disclosure. Our principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. We manufacture and market numerous lines of rubber tires for: • • • • • • • • • automobiles trucks buses aircraft motorcycles earthmoving and mining equipment farm implements industrial equipment, and various other applications. In each case, our tires are offered for sale to vehicle manufacturers for mounting as original equipment (“OE”) and for replacement worldwide. We manufacture and sell tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands and various other Goodyear owned “house” brands, and the private-label brands of certain customers. In certain geographic areas we also: • • • • retread truck, aviation and off-the-road, or OTR, tires, manufacture and sell tread rubber and other tire retreading materials, sell chemical products, and provide automotive and commercial repair services and miscellaneous other products and services. Our principal products are new tires for most applications. Approximately 87% of our sales in 2016 , 2015 and 2014 were for new tires. Sales of chemical products and natural rubber to unaffiliated customers w ere 3% i n 2016 , 2% in 2015 and 3% in 2014 of our consolidated sales ( 5% , 4% and 5% of Americas total sales in 2016 , 2015 and 2014 , respectively). The percentages of each segment’s sales attributable to new tires during the periods indicated were: Year Ended December 31, Sales of New Tires By 2016 2015 2014 Americas 82% 84% 82% Europe, Middle East and Africa 94 94 94 Asia Pacific 89 89 88 Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Goodyear does not include motorcycle, aviation or all-terrain vehicle tires in reported tire unit sales. 2 Table of Contents Tire unit sales for each segment during the periods indicated were: GOODYEAR’S ANNUAL TIRE UNIT SALES — SEGMENT Year Ended December 31, (In millions of tires) 2016 2015 2014 Americas 74.1 79.1 78.5 Europe, Middle East and Africa 61.1 61.1 60.5 Asia Pacific Goodyear worldwide tire units 30.9 26.0 23.0 166.1 166.2 162.0 Our replacement and OE tire unit sales during the periods indicated were: GOODYEAR’S ANNUAL TIRE UNIT SALES — REPLACEMENT AND OE Year Ended December 31, (In millions of tires) 2016 Replacement tire units 2015 117.3 OE tire units Goodyear worldwide tire units 2014 115.5 112.9 48.8 50.7 49.1 166.1 166.2 162.0 New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, we have two major competitors: Bridgestone (based in Japan) and Michelin (based in France). Other significant competitors include Continental, Cooper, Hankook, Kumho, Pirelli, SRI, Toyo, Yokohama and various regional tire manufacturers. We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. Goodyear and Dunlop brand tires enjoy a high recognition factor and have a reputation for performance and product design. The Kelly, Debica, Sava and Fulda brands and various house brand tire lines offered by us, and tires manufactured and sold by us to private brand customers, compete primarily on the basis of value and price. We do not consider our tire businesses to be seasonal to any significant degree. A MERICAS Americas, our largest segment in terms of revenue, develops, manufactures, distributes and sells tires and related products and services in North, Central and South America, and sells tires to various export markets, primarily through intersegment sales. Americas manufactures tires in six plants in the United States, two plants in Canada and five plants in Brazil, Chile, Colombia, Peru and Venezuela. Americas manufactures and sells tires for automobiles, trucks, buses, earthmoving, mining and industrial equipment, aircraft, and for various other applications. Goodyear brand radial passenger tire lines sold throughout Americas include the Assurance family of product lines for the premium and mid-tier passenger and cross-over utility segments; the Direction family of product lines for the mid-tier consumer segment; the Eagle family of product lines for the high-performance segment; the Wrangler family of product lines for the sport utility vehicle and light truck segments; and the Ultra Grip family of winter tires. Additionally, we offer Dunlop brand radial tire lines including Signature HP, SP Sport and Direzza for the passenger and performance segments; the Grandtrek tire lines for the crossover, sport utility vehicle and light truck segments; and SP Winter, Winter Maxx and Grandtrek tire lines for the winter tire segment. Americas also manufactures and sells several lines of Kelly brand radial tires for passenger cars and light trucks including the Kelly Edge A/S, Edge HP, Edge AT and Safari TSR. Goodyear’s Americas commercial business unit provides commercial truck tires, retreads, services, tools and business solutions to trucking fleets. In 2016, Americas launched five new consumer tires under the Goodyear and Kelly brands, including our new Goodyear Wrangler TrailRunner AT, Goodyear Eagle F1 Asymmetric 3 and Kelly Edge HP. Americas commercial truck tire business launched eleven new tire lines under the Goodyear Endurance, Goodyear Fuel Max, Goodyear Armor Max, Goodyear CityMax, Marathon Workhorse and Kelly ArmorSteel lines to service our long haul, regional and mixed service customers. 3 Table of Contents In 2016, Americas expanded its roll-out of online tire sales in the United States, after becoming the first major tire manufacturer to sell products, as well as installation services, online through our website, www.goodyear.com in 2015. We service our online customers through a network of authorized installers including independent dealers and Company-owned locations across the United States. Americas also: • manufactures tread rubber and other tire retreading materials for trucks, heavy equipment and aviation, • retreads truck, aviation and OTR tires, primarily as a service to its commercial customers, • provides automotive maintenance and repair services at approximately 600 retail outlets primarily under the Goodyear or Just Tires names, • provides trucking fleets with new tires, retreads, mechanical service, preventative maintenance and roadside assistance from approximately 190 Company-owned Goodyear Commercial Tire & Service Centers, • sells automotive repair and maintenance items, automotive equipment and accessories and other items to dealers and consumers, • sells chemical products and natural rubber to Goodyear’s other business segments and to unaffiliated customers, and • provides miscellaneous other products and services. Markets and Other Information Tire unit sales to replacement and OE customers served by Americas during the periods indicated were: AMERICAS UNIT SALES — REPLACEMENT AND OE Year Ended December 31, (In millions of tires) 2016 2015 2014 Replacement tire units 55.0 57.4 56.5 OE tire units 19.1 21.7 22.0 74.1 79.1 78.5 Total tire units Americas is a major supplier of tires to most manufacturers of automobiles, trucks, buses, aircraft, and earthmoving, mining and industrial equipment that have production facilities located in the Americas. Americas' primary competitors are Bridgestone and Michelin. Other significant competitors include Continental, Cooper, Pirelli, and imports from other regions, primarily Asia. Goodyear, Dunlop and Kelly brand tires are sold in Americas through several channels of distribution. The principal channel for Goodyear brand tires is a large network of independent dealers. Goodyear, Dunlop and Kelly brand tires are also sold to numerous national and regional retailers and in Goodyear Companyowned stores in the United States. We are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), which has established various standards and regulations applicable to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having a defect related to motor vehicle safety or that do not comply with a motor vehicle safety standard. In addition, the Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”) imposes numerous reporting requirements with respect to tires. The TREAD Act also requires tire manufacturers, among other things, to remedy tire safety defects without charge for five years and comply with revised and more rigorous tire testing standards. NHTSA is also in the process of establishing national tire labeling regulations, under which certain tires sold in the United States will be required to be rated for rolling resistance, traction and tread wear. In 2012, Brazil adopted a tire labeling regulation, which took effect in 2015 and set requirements for tire certification and labeling for rolling resistance, wet grip braking and noise for all radial passenger car, light truck and commercial truck tires sold in that country. E UROPE, M IDDLE E AST A ND A FRICA Europe, Middle East and Africa, our second largest segment in terms of revenue, develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, motorcycles, and earthmoving, mining and industrial equipment throughout Europe, the Middle East and Africa under the Goodyear, Dunlop, Debica, Sava and Fulda brands and other house brands, and sells tires to various export markets, primarily through intersegment sales. EMEA manufactures tires in fourteen plants in France, Germany, Luxembourg, Poland, Slovenia, South Africa and Turkey. 4 Table of Contents In 2016, EMEA launched six new consumer tires under the Goodyear, Dunlop, Sava and Fulda brands, including our new Goodyear Eagle F1 Asymmetric 3 and Dunlop Sport Maxx RT2 lines for the high performance tire segment. EMEA also introduced five new commercial tires to serve our regional haul customers. EMEA also: • • • • sells aviation tires, and manufactures and sells retreaded aviation tires, provides various retreading and related services for truck and OTR tires, primarily for its commercial truck tire customers, offers automotive repair services at retail outlets, and provides miscellaneous other products and services. Markets and Other Information Tire unit sales to replacement and OE customers served by EMEA during the periods indicated were: EUROPE, MIDDLE EAST AND AFRICA UNIT SALES — REPLACEMENT AND OE Year Ended December 31, (In millions of tires) 2016 2015 2014 Replacement tire units 43.8 43.8 43.7 OE tire units 17.3 17.3 16.8 61.1 61.1 60.5 Total tire units EMEA is a significant supplier of tires to most vehicle manufacturers across the region. EMEA’s primary competitors are Michelin, Bridgestone, Continental, Pirelli, several regional and local tire producers and imports from other regions, primarily Asia. Goodyear and Dunlop brand tires are sold for replacement in EMEA through various channels of distribution, principally independent multi-brand tire dealers. In some areas, Goodyear brand tires, as well as Dunlop, Debica, Sava and Fulda brand tires, are distributed through independent dealers, regional distributors and retail outlets, of which approximately 80 are owned by Goodyear. Our European operations are subject to regulation by the European Union. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics. A SIA P ACIFIC Our Asia Pacific segment develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, farm, and earthmoving, mining and industrial equipment throughout the Asia Pacific region, and sells tires to various export markets, primarily through intersegment sales. Asia Pacific manufactures tires in seven plants in China, India, Indonesia, Japan, Malaysia and Thailand. Asia Pacific also: • • • • retreads truck tires and aviation tires, manufactures tread rubber and other tire retreading materials for aviation tires, provides automotive maintenance and repair services at retail outlets, and provides miscellaneous other products and services. In 2016, Asia Pacific rele ased three n ew consumer tires under the Goodyear brand, including the Goodyear Eagle F1 Asymmetric 3 and the Wrangler Triplemax. 2016 also marked a year of continued integration of the NGY business into the Asia Pacific region. In this context, NGY has launched an all-season product, the Vector 4Seasons Hybrid. Asia Pacific also launched the Remington brand and two ne w commercial tire products in China. 5 Table of Contents Markets and Other Information Tire unit sales to replacement and OE customers served by Asia Pacific during the periods indicated were: ASIA PACIFIC UNIT SALES — REPLACEMENT AND OE Year Ended December 31, (In millions of tires) 2016 2015 2014 Replacement tire units 18.5 14.3 12.7 OE tire units 12.4 11.7 10.3 30.9 26.0 23.0 Total tire units Asia Pacific’s major competitors are Bridgestone and Michelin along with many other global brands present in different parts of the region, including Continental, Dunlop, Hankook and a large number of regional and local tire producers. Asia Pacific sells primarily Goodyear brand tires throughout the region and also sells the Dunlop brand in Australia and New Zealand. Other brands of tires, such as Blue Streak, Remington, Kelly and Diamondback, are sold in smaller quantities. Tires are sold through a network of licensed and franchised retail stores and multi-brand retailers through a network of wholesale dealers. In Australia, we also operate a network of approximately 210 retail stores under the Beaurepaires brand. GENERAL BUSINESS INFORMATION Sources and Availability of Raw Materials The principal raw materials used by Goodyear are synthetic and natural rubber. Synthetic rubber accounts for approximately 60% of all rubber consumed by us on an annual basis. Our plants located in Beaumont and Houston, Texas supply a major portion of our global synthetic rubber requirements. We purchase all of our requirements for natural rubber in the world market. Other important raw materials and components we use are carbon black, steel cord, fabrics and petrochemical-based commodities. Substantially all of these raw materials and components are purchased from independent suppliers, except for certain chemicals we manufacture. We purchase most raw materials and components in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. We anticipate the continued availability of all raw materials and components we will require during 2017 , subject to spot shortages and unexpected disruptions caused by natural disasters such as hurricanes and other similar events. Substantial quantities of fuel and other petrochemical-based commodities are used in the production of tires, synthetic rubber and other products. Supplies of such fuels and commodities have been and are expected to continue to be available to us in quantities sufficient to satisfy our anticipated requirements, subject to spot shortages. Patents and Trademarks We own approximately 1,900 product, process and equipment patents issued by the United States Patent Office and approximately 3,600 patents issued or granted in other countries around the world. We have approximately 400 applications for United States patents pending and approximately 1,900 patent applications on file in other countries around the world. While such patents and patent applications as a group are important, we do not consider any patent or patent application to be of such importance that the loss or expiration thereof would materially affect Goodyear or any business segment. We own, control or use approximately 1,500 different trademarks, including several using the word “Goodyear” or the word “Dunlop.” Approximately 13,300 registrations and 500 pending applications worldwide protect these trademarks. While such trademarks as a group are important, the only trademarks we consider material to our business, or to the business of any of our segments, are those using the word “Goodyear,” and with respect to certain of our international business segments, those using the word “Dunlop.” We believe our trademarks are valid and most are of unlimited duration as long as they are adequately protected and appropriately used. Backlog Our backlog of orders is not considered material to, or a significant factor in, evaluating and understanding any of our business segments or our businesses considered as a whole. 6 Table of Contents Research and Development Our direct and indirect expenditures on research, development and ce rtain enginee ring activities relating to the design, development and significant modification of new and existing products and services and the formulation and design of new, and significant improvements to existing, manufacturing processes and equipment during the periods indicated were: Year Ended December 31, (In millions) 2016 2015 2014 Research and development expenditures $388 $382 $399 Employees At December 31, 2016 , we employed approximately 66,000 full-time and temporary people throughout the world, including approximately 37,000 people covered under collective bargaining agreements. Approximately 6,800 of our employees in the United States are covered by a master collective bargaining agreement with the United Steelworkers ("USW"), which expires in July 2017. Approximately 16,000 of our employees outside of the United States are covered by union contracts that currently have expired or that will expire in 2017 , primarily in Brazil, Poland, China and France. In addition, approximately 1,000 of our employees in the United States are covered by other contracts with the USW and various other unions. Unions also represent the major portion of our employees in Europe. Compliance with Environmental Regulations We are subject to extensive regulation under environmental and occupational health and safety laws and regulations. These laws and regulations relate to, among other things, air emissions, discharges to surface and underground waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. We have several continuing programs designed to ensure compliance with Federal, state and local environmental and occupational safety and health laws and regulations. We expect capital expenditures for pollution control facilities and occupational safety and health projects to be $40 million to $50 million annually in 2017 and 2018 . We also incur ongoing expenses to maintain and operate our pollution control facilities and conduct our other environmental activities, including the control and disposal of hazardous substances. These expenditures are expected to be sufficient to comply with existing environmental laws and regulations and are not expected to have a material adverse effect on our competitive position. In the future, we may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new environmental laws and regulatory standards, or the availability of new technologies. Compliance with Federal, state and local environmental laws and regulations in the future may require a material increase in our capital expenditures and could adversely affect our earnings and competitive position. INFORMATION ABOUT INTERNATIONAL OPERATIONS We engage in manufacturing and/or sales operations in most countries in the world, often through subsidiary companies. We have manufacturing operations in 21 countries, including the United States. Most of our international manufacturing operations are engaged in the production of tires. Certain other products are also manufactured in plants located outside the United States. Financial information related to our geographic areas for the three year period ended December 31, 2016 appears in the Note to the Consolidated Financial Statements No. 8, Business Segments, and is incorporated herein by reference. In addition to the ordinary risks of the marketplace, in some countries our operations are affected by price or profit margin controls, import controls, labor regulations, tariffs, extreme inflation and/or fluctuations in currency values. Furthermore, in certain countries where we operate, transfers of funds into or out of such countries are generally or periodically subject to certain requirements. Refer to “Item 1A. Risk Factors” for a discussion of the risks related to our international operations. 7 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are: (1) the names and ages of all executive officers of the Company at February 8, 2017, (2) all positions with the Company presently held by each such person, and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years. Name Position(s) Held Richard J. Kramer Chairman of the Board, Chief Executive Officer and President Age 53 Mr. Kramer was elected Chief Executive Officer and President in April 2010 and Chairman in October 2010. He is the principal executive officer of the Company. Mr. Kramer joined Goodyear in March 2000 and has served as Executive Vice President and Chief Financial Officer (June 2004 to August 2007), President, North America (March 2007 to February 2010) and Chief Operating Officer (June 2009 to April 2010). Laura K. Thompson Executive Vice President and Chief Financial Officer 52 Ms. Thompson was named Executive Vice President and Chief Financial Officer in December 2013. She is Goodyear’s principal financial officer. Ms. Thompson joined Goodyear in 1983 and has served as Vice President, Finance, North America (March 2011 to November 2013). Stephen R. McClellan President, Americas 51 Mr. McClellan was named President, Americas effective January 1, 2016. He is the executive officer responsible for Goodyear's operations in North America and Latin America. Mr. McClellan joined Goodyear in 1988 and has served as President, North America (August 2011 to December 2015). Jean-Claude Kihn President, Europe, Middle East and Africa 57 Mr. Kihn was named President, Europe, Middle East and Africa effective January 1, 2016. He is the executive officer responsible for Goodyear’s operations in Europe, the Middle East and Africa. Mr. Kihn joined Goodyear in 1988 and has served as Senior Vice President and Chief Technical Officer (January 2008 to December 2012), Senior Vice President and Managing Director, Goodyear Brazil (December 2012 to October 2014) and President, Latin America (November 2014 to December 2015). Christopher R. Delaney President, Asia Pacific 55 Mr. Delaney joined Goodyear as President-Elect, Asia Pacific in August 2015, and was named President, Asia Pacific effective January 1, 2016. He is the executive officer responsible for Goodyear’s operations in Asia, Australia, New Zealand and the Western Pacific. Prior to joining Goodyear, Mr. Delaney was Chief Executive Officer and Managing Director of Goodman Fielder Ltd., a food products company in Australia, New Zealand and the Asia Pacific region, from July 2011 until March 2015. David L. Bialosky Senior Vice President, General Counsel and Secretary 59 Mr. Bialosky joined Goodyear as Senior Vice President, General Counsel and Secretary in September 2009. He is Goodyear's chief legal officer. Paul Fitzhenry Senior Vice President, Global Communications 57 Mr. Fitzhenry joined Goodyear as Senior Vice President, Global Communications in October 2012. He is the executive officer responsible for Goodyear's communications activities worldwide. Prior to joining Goodyear, he was Vice President of Corporate Communications of Tyco International, a diversified global industrial company, from 2007 until September 2012. 8 Table of Contents Name Position(s) Held Richard Kellam Senior Vice President, Sales and Marketing Excellence Age 55 Mr. Kellam joined Goodyear as Senior Vice President, Sales and Marketing Excellence in September 2014. He is the executive officer responsible for Goodyear’s global sales and marketing activities. Prior to joining Goodyear, Mr. Kellam served in positions of increasing responsibility at Mars Incorporated, a global manufacturer of confectionery, pet food and other food products, including most recently as Global Chief Customer Officer from 2009 until September 2014. Scott H. King Senior Vice President, Strategy and Business Development 55 Mr. King was named Senior Vice President, Strategy and Business Development in April 2015. He is the executive officer responsible for Goodyear's strategic initiatives and business development activities. Mr. King rejoined Goodyear after serving as Chief Financial Officer of Veyance Technologies, Inc., Goodyear's former Engineered Products Division, from August 2007 until February 2015. From April 2006 to August 2007, he served as Vice President, Finance of Goodyear's Engineered Products Division. John T. Lucas Senior Vice President, Global Human Resources 57 Mr. Lucas joined Goodyear as Senior Vice President, Global Human Resources in February 2015. He is Goodyear’s chief human resources officer. Prior to joining Goodyear, Mr. Lucas was Senior Vice President of Human Resources for Lockheed Martin Corporation, a global security and aerospace company, from February 2010 until February 2015. Richard J. Noechel Senior Vice President, Business Transformation 48 Mr. Noechel was named Senior Vice President, Business Transformation effective June 1, 2016. He is the executive officer responsible for Goodyear's strategic initiatives intended to drive greater efficiency in its business. Mr. Noechel joined Goodyear in October 2004 and has served as Vice President and Controller (March 2011 to May 2016). Joseph Zekoski Senior Vice President, Global Operations and Chief Technical Officer 66 Mr. Zekoski was named Senior Vice President and Chief Technical Officer in February 2015 and was named Senior Vice President, Global Operations and Chief Technical Officer effective August 17, 2016. He is the executive officer responsible for Goodyear's global manufacturing, supply chain, research and development, engineering and product quality activities. Mr. Zekoski joined Goodyear in 1979 and has served as Vice President, Global Product Development and Innovation Center Operations (January 2008 to December 2012) and Interim Chief Technical Officer (December 2012 to February 2015). Evan M. Scocos Vice President and Controller 45 Mr. Scocos was named Vice President and Controller effective June 1, 2016. He is Goodyear's principal accounting officer. Mr. Scocos joined Goodyear in March 2004 and has served as Controller, North America (November 2008 to April 2013), Vice President and Assistant Controller (May 2013 to March 2014) and Vice President and General Auditor (March 2014 to May 2016). No family relationship exists between any of the above executive officers or between the executive officers and any director of the Company. Each executive officer is elected by the Board of Directors of the Company at its annual meeting to a term of one year or until his or her successor is duly elected. In those instances where the person is elected at other than an annual meeting, such person’s term will expire at the next annual meeting. 9 Table of Contents ITEM 1A. RISK FACTORS. You should carefully consider the risks described below and other information contained in this Annual Report on Form 10-K when considering an investment decision with respect to our securities. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. Any of the events discussed in the risk factors below may occur. If they do, our business, results of operations, financial condition or liquidity could be materially adversely affected. In such an instance, the trading price of our securities could decline, and you might lose all or part of your investment. If we do not successfully implement our strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected. Volatile global industry conditions continued in 2016, and our business was impacted by trends that negatively affected the tire industry in general. These negative trends include mixed industry conditions in Americas, where we experienced weakening demand for commercial truck tires in the United States and continuing recessionary economic conditions in Brazil, and increased competition, particularly with respect to smaller rim diameter consumer tires, in EMEA. Global tire industry demand continues to be difficult to predict. In addition, we were also impacted by the continued strengthening of the U.S. dollar against most foreign currencies. If these overall trends continue or worsen, then our operational and financial condition could be adversely affected. In order to offset the impact of these trends, we have announced important strategic initiatives, such as our operational excellence, sales and marketing excellence and innovation excellence initiatives. We are also undertaking significant capital investments in building, expanding and modernizing manufacturing facilities around the world, including a new manufacturing facility in San Luis Potosi, Mexico. The failure to implement successfully our important strategic initiatives may materially adversely affect our operating results, financial condition and liquidity. Our operational excellence initiatives are aimed at improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service. Our sales and marketing excellence initiatives are intended to build the value of our brand, help our customers win in their markets, and become consumers' preferred choice. Our innovation excellence initiatives are designed to develop great products and services that anticipate and respond to the needs of consumers. If we fail to execute these initiatives successfully, we may fail to achieve our financial goals. Our performance is also dependent on our ability to improve the volume and mix of higher margin tires we sell in our targeted market segments. In order to do so, we must be successful in developing, producing, marketing and selling products that consumers' desire and that offer higher margins to us. Shifts in consumer demand away from higher margin tires could materially adversely affect our business. We are currently capacity constrained with respect to the production of certain higher margin tires, particularly in the United States and Western Europe. We plan to alleviate these constraints by utilizing our global manufacturing footprint to meet the demand for our tires and by adding manufacturing capacity to produce approximately 20 million tires at our manufacturing facilities worldwide. However, in spite of these initiatives, we may not be able to meet all of the demand for certain of our higher margin tires, which could harm our competitive position and limit our growth. We cannot assure you that our strategic initiatives will be successful. If not, we may not be able to achieve or sustain future profitability, which would impair our ability to meet our debt and other obligations and would otherwise negatively affect our operating results, financial condition and liquidity. We face significant global competition and our market share could decline. New tires are sold under highly competitive conditions throughout the world. We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. On a worldwide basis, we have two major competitors, Bridgestone (based in Japan) and Michelin (based in France), that have large shares of the markets of the countries in which they are based and are aggressively seeking to maintain or improve their worldwide market share. Other significant competitors include Continental, Cooper, Hankook, Kumho, Pirelli, SRI, Toyo, Yokohama and various regional tire manufacturers. Our competitors produce significant numbers of tires in low-cost countries, and have announced plans to further increase their production capacity. Our ability to compete successfully will depend, in significant part, on our ability to continue to innovate and manufacture the types of tires demanded by consumers, and to reduce costs by such means as reducing excess and high-cost capacity, leveraging global purchasing, improving productivity, eliminating redundancies and increasing production at low-cost supply sources. If we are unable to compete successfully, our market share may decline, materially adversely affecting our results of operations and financial condition. In addition, the automotive industry may experience significant changes due to the introduction of new technologies, such as autonomous vehicles, or new services, business models or methods of travel, such as ride sharing. As the automotive industry evolves, we may need to provide a wider range of products and services to remain competitive, including services that we do not currently offer, or the demand for our products may decline if automotive production declines and/or total vehicle miles traveled 10 Table of Contents declines. If we do not accurately predict, prepare for and respond to market developments, technological innovations and changing customer and consumer needs, our results of operations and financial condition could be materially adversely affected. Raw material and energy costs may materially adversely affect our operating results and financial condition. Raw material costs have historically been volatile, and we may experience increases in the prices of natural and synthetic rubber, carbon black and petrochemicalbased commodities. Market conditions or contractual obligations may prevent us from passing any such increased costs on to our customers through timely price increases. Additionally, higher raw material and energy costs around the world may offset our efforts to reduce our cost structure. As a result, higher raw material and energy costs could result in declining margins and operating results and adversely affect our financial condition. The volatility of raw material costs may cause our margins, operating results and liquidity to fluctuate. In addition, lower raw material costs may put downward pressure on the price of tires, which could ultimately reduce our margins and adversely affect our results of operations. If we fail to extend or renegotiate our primary collective bargaining contracts with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage or interruption, our business, results of operations, financial condition and liquidity could be materially adversely affected. We are a party to collective bargaining contracts with our labor unions, which represent a significant number of our employees. Our master collective bargaining agreement with the USW covers approximately 6,800 employees in the United States at December 31, 2016 , and expires July 29, 2017. In addition, approximately 16,000 of our employees outside of the United States are covered by union contracts that have expired or are expiring in 2017, primarily in Brazil, Poland, China and France. Although we believe that our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition and liquidity. We could be negatively impacted by the imposition of tariffs on imported tires. The imposition of tariffs on certain tires imported from China or other countries may reduce our flexibility to utilize our global manufacturing footprint to meet demand for our tires around the world. In addition, the imposition of tariffs in the United States may result in the tires subject to such tariffs being diverted to other regions of the world, such as Europe, Latin America or Asia, which could materially adversely affect our results of operations, financial condition and liquidity in those regions. Our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity. We have manufacturing and distribution facilities throughout the world. Our international operations are subject to certain inherent risks, including: • exposure to local economic conditions; • adverse foreign currency fluctuations; • adverse currency exchange controls; • withholding taxes and restrictions on the withdrawal of foreign investment and earnings; • tax policies and regulations; • labor regulations; • tariffs; • government price and profit margin controls; • expropriations of property; • adverse changes in the diplomatic relations of foreign countries with the United States; • the potential instability of foreign governments; • hostility from local populations and insurrections; • risks of renegotiation or modification of existing agreements with governmental authorities; • export and import restrictions; and • other changes in laws or government policies. 11 Table of Contents The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. Certain regions, including Latin America, Asia, Eastern Europe, the Middle East and Africa, are inherently more economically and politically volatile and as a result, our business units that operate in these regions could be subject to significant fluctuations in sales and operating income from quarter to quarter. Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a significant impact on our results of operations in future periods. For example, since 2003, Venezuela has imposed currency exchange controls that establish the exchange rate between the Venezuelan bolivar fuerte and the U.S. dollar and restrict the ability to exchange bolivares fuertes for dollars. These restrictions have delayed and limited our ability to pay third-party and affiliated suppliers and to otherwise repatriate funds from Venezuela. In addition, other government regulations, such as price and profit margin controls and strict labor laws, have limited our ability to make and execute operational decisions at our Venezuelan subsidiary. The lack of currency exchangeability, combined with these other operating restrictions, have significantly limited our Venezuelan subsidiary’s ability to maintain normal production and control over its operations. As a result, we deconsolidated the operations of our Venezuelan subsidiary and began reporting its results using the cost method of accounting effective December 31, 2015. In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include import and export laws, anti-competition laws, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, data privacy requirements, tax laws, and accounting, internal control and disclosure requirements. Violations of these laws and regulations could result in civil and criminal fines, penalties and sanctions against us, our officers or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our reputation, business and results of operations. In certain foreign jurisdictions, there is a higher risk of fraud or corruption and greater difficulty in maintaining effective internal controls and compliance programs. Although we have implemented policies and procedures designed to promote compliance with applicable laws and regulations, there can be no assurance that our employees, contractors or agents will not violate our policies or applicable laws and regulations. We have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity. The financial position and results of operations of many of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the U.S. dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating margin (and conversely, the weakening of the U.S. dollar against these foreign currencies has a positive impact). For the year ended December 31, 2016 , foreign currency translation unfavorably affected sales by $258 million and unfavorably affected segment operating income by $30 million compared to the year ended December 31, 2015 . The volatility of currency exchange rates may materially adversely affect our operating results. Our long term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results. The adequacy of our liquidity depends on our ability to achieve an appropriate combination of operating improvements, financing from third parties and access to capital markets. We may need to undertake additional financing actions in the capital markets in order to ensure that our future liquidity requirements are addressed or to implement strategic initiatives. These actions may include the issuance of additional debt or equity, or the factoring of our accounts receivable. Our access to the capital markets cannot be assured and is dependent on, among other things, the ability and willingness of financial institutions to extend credit on terms that are acceptable to us or our suppliers, or to honor future draws on our existing lines of credit, and the degree of success we have in implementing our strategic initiatives. Over the past several years, we have increased our use of supplier financing programs and the factoring of our accounts receivable in order to improve our working capital efficiency and reduce our costs. If these programs become unavailable or less attractive to us or our suppliers, our liquidity could be adversely affected. Future liquidity requirements, or our inability to access cash deposits or make draws on our lines of credit, also may make it necessary for us to incur additional debt. A substantial portion of our assets is subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. Our inability to access the capital markets or incur additional debt in the future could have a material adverse effect on our liquidity and operations, and could require us to consider further measures, including deferring planned capital expenditures, reducing discretionary spending, selling additional assets and restructuring existing debt. 12 Table of Contents Financial difficulties, work stoppages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business. Volatile global industry conditions continued in 2016, particularly in Americas and EMEA. As a result of these industry conditions, automotive vehicle production and global tire industry demand continues to be difficult to predict. Although sales to our OE customers accounted for approximately 20% of our net sales in 2016, demand for our products by OE customers and production levels at our facilities are impacted by automotive vehicle production. We may experience future declines in sales volume due to declines in new vehicle sales, the discontinuation or sale of certain OE brands, platforms or programs, increased competition, or weakness in the demand for replacement tires, which could result in us incurring under-absorbed fixed costs at our production facilities or slowing the rate at which we are able to recover those costs. Automotive production can also be affected by labor relation issues, financial difficulties or supply disruptions. Our OE customers could experience production disruptions resulting from their own or supplier labor, financial or supply difficulties. Such events may cause an OE customer to reduce or suspend vehicle production. As a result, an OE customer could halt or significantly reduce purchases of our products, which would harm our results of operations, financial condition and liquidity. In addition, the bankruptcy, restructuring or consolidation of one or more of our major OE customers, dealers or suppliers could result in the write-off of accounts receivable, a reduction in purchases of our products or a supply disruption to our facilities, which could negatively affect our results of operations, financial condition and liquidity. Our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner. Our capital expenditures are limited by our liquidity and capital resources and the amount we have available for capital spending is limited by the need to pay our other expenses and to maintain adequate cash reserves and borrowing capacity to meet unexpected demands that may arise. We believe that our ratio of capital expenditures to sales is lower than the comparable ratio for our principal competitors. Productivity improvements and manufacturing cost improvements may be required to offset potential increases in labor and raw material costs and competitive price pressures. In addition, as part of our strategy to reduce high-cost and excess manufacturing capacity and to increase our capacity to produce higher margin tires, we may need to modernize or expand our facilities. We are currently undertaking significant construction, expansion and modernization projects in the United States, China, India and Mexico. We may not have sufficient resources to implement planned capital expenditures with minimal disruption to our existing manufacturing operations, or within desired time frames and budgets. Any disruption to our operations, delay in implementing capital improvements or unexpected costs may materially adversely affect our business and results of operations. If we are unable to make sufficient capital expenditures, or to maximize the efficiency of the capital expenditures we do make, we may be unable to achieve productivity improvements, which may harm our competitive position, or to manufacture the products necessary to compete successfully in our targeted market segments. In addition, plant construction and modernization may temporarily disrupt our manufacturing operations and lead to temporary increases in our costs. We have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health. We have a substantial amount of debt. As of December 31, 2016 , our debt (including capital leases) on a consolidated basis was approximately $5.5 billion. Our substantial amount of debt and other obligations could have important consequences. For example, it could: • make it more difficult for us to satisfy our obligations; • impair our ability to obtain financing in the future for working capital, capital expenditures, research and development, acquisitions or general corporate requirements; • increase our vulnerability to general adverse economic and industry conditions; • limit our ability to use cash flows from operating activities in other areas of our business or to return cash to shareholders because we would need to dedicate a substantial portion of these funds for payments on our indebtedness; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage compared to our competitors. The agreements governing our debt, including our credit agreements, limit, but do not prohibit, us from incurring additional debt and we may incur a significant amount of additional debt in the future, including additional secured debt. If new debt is added to our current debt levels, our ability to satisfy our debt obligations may become more limited. 13 Table of Contents Our ability to make scheduled payments on, or to refinance, our debt and other obligations will depend on our financial and operating performance, which, in turn, is subject to our ability to implement our strategic initiatives, prevailing economic conditions and certain financial, business and other factors beyond our control. If our cash flow and capital resources are insufficient to fund our debt service and other obligations, we may be forced to reduce or eliminate our share repurchase program and the dividend on our common stock, reduce or delay expansion plans and capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot assure you that our operating performance, cash flow and capital resources will be sufficient to pay our debt obligations when they become due. We cannot assure you that we would be able to dispose of material assets or operations or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we could do so on terms that are acceptable to us. Any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our revolving credit facility, could have a material adverse effect on our liquidity and operations. The agreements governing our secured credit facilities, senior unsecured notes and our other outstanding indebtedness impose significant operating and financial restrictions on us. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These restrictions limit our ability to, among other things: • incur additional debt or issue redeemable preferred stock; • pay dividends, repurchase shares or make certain other restricted payments or investments; • incur liens; • sell assets; • incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us; • enter into affiliate transactions; • engage in sale/leaseback transactions; and • engage in certain mergers or consolidations or transfers of substantially all of our assets. Availability under our first lien revolving credit facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory, the value of our principal trademarks, and certain cash in an amount not to exceed $200 million. To the extent that our eligible accounts receivable and inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under that facility may decrease below its stated amount. In addition, if at any time the amount of outstanding borrowings and letters of credit under that facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. Our ability to comply with these covenants or to maintain our borrowing base may be affected by events beyond our control, including deteriorating economic conditions, and these events could require us to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. We cannot assure you that such waivers, amendments or alternative financing could be obtained, or if obtained, would be on terms acceptable to us. A breach of any of the covenants or restrictions contained in any of our existing or future financing agreements, including the financial covenants in our secured credit facilities, could result in an event of default under those agreements. Such a default could allow the lenders under our financing agreements, if the agreements so provide, to discontinue lending, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies, and/or to declare all borrowings outstanding thereunder to be due and payable. In addition, the lenders could terminate any commitments they have to provide us with further funds. If any of these events occur, we cannot assure you that we will have sufficient funds available to pay in full the total amount of obligations that become due as a result of any such acceleration, or that we will be able to find additional or alternative financing to refinance any such accelerated obligations. Even if we obtain additional or alternative financing, we cannot assure you that it would be on terms that would be acceptable to us. We cannot assure you that we will be able to remain in compliance with the covenants to which we are subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Certain of our borrowings are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, which would require us to use more of our available cash to service our indebtedness. There can be no assurance that we will be able to enter into swap agreements or other hedging arrangements in the future, or that existing or future hedging arrangements will offset increases in interest rates. As of December 31, 2016 , we had $1,679 million of variable rate debt outstanding. 14 Table of Contents We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales. We operate with significant operating and financial leverage. Significant portions of our manufacturing, selling, administrative and general expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of our interest expense is fixed. There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our net sales and therefore our competitiveness could be significantly impacted. As a result, a decline in our net sales could result in a higher percentage decline in our income from operations and net income. We may incur significant costs in connection with our contingent liabilities and tax matters. We have significant reserves for contingent liabilities and tax matters. The major categories of our contingent liabilities include workers' compensation and other employment-related claims, product liability and other tort claims, including asbestos claims, and environmental matters. Our recorded liabilities and estimates of reasonably possible losses for our contingent liabilities are based on our assessment of potential liability using the information available to us at the time and, where applicable, any past experience and recent and current trends with respect to similar matters. Our contingent liabilities are subject to inherent uncertainties, and unfavorable judicial or administrative decisions could occur that we did not anticipate. Such an unfavorable decision could include monetary damages, fines or other penalties or an injunction prohibiting us from taking certain actions or selling certain products. If such an unfavorable decision were to occur, it could result in a material adverse impact on our financial position and results of operations in the period in which the decision occurs, or in future periods. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including with respect to transfer pricing. While we apply consistent transfer pricing policies and practices globally, support transfer prices through economic studies, seek advance pricing agreements and joint audits to the extent possible and believe our transfer prices to be appropriate, such transfer prices, and related interpretations of tax laws, are occasionally challenged by various taxing authorities globally. We have received various tax assessments challenging our interpretations of applicable tax laws in various jurisdictions. Although we believe we have complied with applicable tax laws, have strong positions and defenses and have historically been successful in defending such claims, our results of operations could be materially adversely affected in the case we are unsuccessful in the defense of existing or future claims. If we wish to appeal any future adverse judgment in any of these proceedings, we may be required to post an appeal bond with the relevant court. If we were subject to a significant adverse judgment or experienced an interruption or reduction in the availability of bonding capacity, we may be required to provide letters of credit or post cash collateral, which may have a material adverse effect on our liquidity. For further information regarding our contingent liabilities and tax matters, refer to the Note to the Consolidated Financial Statements, No. 19 , Commitments and Contingent Liabilities. For further information regarding our accounting policies with respect to certain of our contingent liabilities and uncertain income tax positions, refer to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.” We are subject to extensive government regulations that may materially adversely affect our operating results. We are subject to regulation by the Department of Transportation through the National Highway Traffic Safety Administration, or NHTSA, which has established various standards and regulations applicable to tires sold in the United States and tires sold in a foreign country that are identical or substantially similar to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having safety-related defects or that do not comply with a motor vehicle safety standard. The Transportation Recall Enhancement, Accountability, and Documentation Act, or TREAD Act, imposes numerous requirements with respect to the early warning reporting of warranty claims, property damage claims, and bodily injury and fatality claims and also requires tire manufacturers, among other things, to comply with revised and more rigorous tire testing standards. Compliance with the TREAD Act regulations has increased the cost of producing and distributing tires in the United States. In addition, while we believe that our tires are free from design and manufacturing defects, it is possible that a recall of our tires, including under the TREAD Act or in other countries under similar regulations, could occur in the future. A substantial recall could have a material adverse effect on our reputation, operating results and financial condition. In addition, as required by the Energy Independence and Security Act of 2007, NHTSA will establish a national tire fuel efficiency consumer information program. When the related rule-making process is completed, certain tires sold in the United States will be required to be rated for rolling resistance, traction and tread wear. While the Federal law will preempt state tire fuel efficiency laws adopted after January 1, 2006, we may become subject to additional tire fuel efficiency legislation, either in the United States or other countries. Our European operations are subject to regulation by the European Union. In 2009, two regulations, the Tire Safety Regulation and the Tire Labeling Regulation, applicable to tires sold in the European Union were adopted. The Tire Safety Regulation sets 15 Table of Contents performance standards that tires for cars and light and commercial trucks need to meet for rolling resistance, wet grip braking (passenger car tires only) and noise in order to be sold in the European Union, and became effective beginning in 2012, with continuing phases that will become effective through 2020. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics. Other countries, such as Brazil, have also adopted tire labeling regulations, and additional countries may also introduce similar regulations in the future. Tires produced or sold in Europe also have to comply with various other standards, including environmental laws such as REACH (Registration, Evaluation, Authorisation and Restriction of Chemical Substances), which regulates the use of chemicals in the European Union. For example, REACH prohibits the use of highly aromatic oils in tires, which were used as compounding components to improve certain performance characteristics. These U.S. and European regulations, rules adopted to implement these regulations, or other similar regulations that may be adopted in the United States, Europe or elsewhere in the future may require us to alter or increase our capital spending and research and development plans or cease the production of certain tires, which could have a material adverse effect on our operating results. Laws and regulations governing environmental and occupational safety and health are complicated, change frequently and have tended to become stricter over time. As a manufacturing company, we are subject to these laws and regulations both inside and outside the United States. We may not be in complete compliance with such laws and regulations at all times. Our costs or liabilities relating to them may be more than the amount we have reserved, and that difference may be material. In addition, our manufacturing facilities may become subject to further limitations on the emission of “greenhouse gases” due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. While the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the one adopted in the European Union could be adopted in the United States. Any such “cap-and-trade” system (including the system currently in place in the European Union) or other limitations imposed on the emission of “greenhouse gases” could require us to increase our capital expenditures, use our cash to acquire emission credits or restructure our manufacturing operations, which could have a material adverse effect on our operating results, financial condition and liquidity. Compliance with the laws and regulations described above or any of the myriad of applicable foreign, Federal, state and local laws and regulations currently in effect or that may be adopted in the future could materially adversely affect our competitive position, operating results, financial condition and liquidity. We may be adversely affected by any disruption in, or failure of, our information technology systems. We rely upon the capacity, reliability and security of our information technology, or IT, systems across all of our major business functions, including our research and development, manufacturing, retail, financial and administrative functions. We also face the challenge of supporting our older systems and implementing upgrades when necessary. Our security measures are focused on the prevention, detection and remediation of damage from computer viruses, unauthorized access, cyber-attack, natural disasters and other similar disruptions. We may incur significant costs in order to implement the security measures that we feel are necessary to protect our IT systems. However, our IT systems may remain vulnerable to damage despite our implementation of security measures that we deem to be appropriate. Any system failure, accident or security breach involving our IT systems could result in disruptions to our operations. A breach in the security of our IT systems could include the theft of our intellectual property or trade secrets, negatively impact our manufacturing or retail operations, or result in the compromise of personal information of our employees, customers or suppliers. While we have, from time to time, experienced system failures, accidents and security breaches involving our IT systems, these incidents have not had a material impact on our operations, and we are not aware of any resulting theft, loss or disclosure of, or damage to, material data or confidential information. To the extent that any system failure, accident or security breach results in material disruptions to our operations or the theft, loss or disclosure of, or damage to, material data or confidential information, our reputation, business, results of operations and financial condition could be materially adversely affected. If we are unable to attract and retain key personnel our business could be materially adversely affected. Our business substantially depends on the continued service of key members of our management. The loss of the services of a significant number of members of our management could have a material adverse effect on our business. Our future success will also depend on our ability to attract and retain highly skilled personnel, such as engineering, marketing and senior management professionals. Competition for these employees is intense, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business. If we do not succeed in retaining our current employees and attracting new high quality employees, our business could be materially adversely affected. 16 Table of Contents We may be impacted by economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters. We manage businesses and facilities worldwide. Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters. Any such disruption could cause delays in the production and distribution of our products and the loss of sales and customers. We may not be insured against all such potential losses and, if insured, the insurance proceeds that we receive may not adequately compensate us for all of our losses. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ITEM 2. PROPERTIES. We manufacture our products in 48 manufacturing facilities located around the world including 14 plants in the United States. A MERICAS M ANUFACTURING F ACILITIES . Americas owns or leases and operates 24 manufacturing facilities in 7 countries, including: • 13 •4 •1 •2 •3 •1 tire plants, chemical plants, tire mold plant, tire retread plants, aviation retread plants, and mix plant. These facilities have floor space aggregating approximately 24 million square feet. E UROPE , M IDDLE E AST A ND A FRICA M ANUFACTURING F ACILITIES . EMEA owns or leases and operates 16 manufacturing facilities in 8 countries, including: • 14 tire plants, • 1 tire mold and tire manufacturing machine facility, and • 1 aviation retread plant. These facilities have floor space aggregating approximately 18 million square feet. A SIA P ACIFIC M ANUFACTURING F ACILITIES . Asia Pacific owns and operates 8 manufacturing facilities in 6 countries, including 7 tire plants and 1 aviation retread plant. These facilities have floor space aggregating approximately 7 million square feet. P LANT U TILIZATION . Our worldwide tire capacity utilization rate was approximately 83% during 2016 compared to approximately 86% in 2015 and 85% in 2014 . The reported capacity utilization is an overall average for the Company. Our utilization rate can vary significantly between product lines, such as high-valueadded and low-value-added tires or consumer and commercial tires, and can also vary between business segments. O THER F ACILITIES . We also own and operate two research and development facilities and technical centers, and seven tire proving grounds. We lease our Corporate and Americas headquarters, research and development facility and technical center in Akron, Ohio. We operate approximately 1,100 retail outlets for the sale of our tires to consumer and commercial customers, approximately 49 tire retreading facilities and approximately 180 warehouse distribution facilities. Substantially all of these facilities are leased. We do not consider any one of these leased properties to be material to our operations. For additional information regarding leased properties, refer to the Notes to the Consolidated Financial Statements No. 13, Property, Plant and Equipment and No. 14, Leased Assets. 17 Table of Contents ITEM 3. LEGAL PROCEEDINGS. Asbestos Litigation We are currently one of numerous defendants in legal proceedings in certain state and Federal courts involving approximately 64,400 claimants at December 31, 2016 relating to their alleged exposure to materials containing asbestos in products allegedly manufactured by us or asbestos materials present at our facilities. We manufactured, among other things, rubber coated asbestos sheet gasket materials from 1914 through 1973 and aircraft brake assemblies containing asbestos materials prior to 1987. Some of the claimants are independent contractors or their employees who allege exposure to asbestos while working at certain of our facilities. It is expected that in a substantial portion of these cases there will be no evidence of exposure to a Goodyear manufactured product containing asbestos or asbestos in our facilities. The amount expended by us and our insurers on defense and claim resolution was approximately $20 million during 2016 . The plaintiffs in the pending cases allege that they were exposed to asbestos and, as a result of such exposure, suffer from various respiratory diseases, including in some cases mesothelioma and lung cancer. The plaintiffs are seeking unspecified actual and punitive damages and other relief. For additional information on asbestos litigation, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities. Amiens Labor Claims Approximately 840 former employees of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims totaling €117 million ( $123 million ) against Goodyear Dunlop Tires France. We intend to vigorously defend ourselves against these claims, and any additional claims that may be asserted against us, and cannot estimate the amounts, if any, that we may ultimately pay in respect of such claims. Other Matters In addition to the legal proceedings described above, various other legal actions, indirect tax assessments, claims and governmental investigations and proceedings covering a wide range of matters are pending against us, including claims and proceedings relating to several waste disposal sites that have been identified by the United States Environmental Protection Agency and similar agencies of various states for remedial investigation and cleanup, which sites were allegedly used by us in the past for the disposal of industrial waste materials. Based on available information, we do not consider any such action, assessment, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto. For additional information regarding our legal proceedings, refer to the Note to the Consolidated Financial Statements No. 19, Commitments and Contingent Liabilities. 18 Table of Contents PART II. ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The principal market for our common stock is the NASDAQ Global Select Market (Stock Exchange Symbol: GT). Information relating to the high and low sale prices of shares of our common stock and dividends declared on our common stock appears under the caption “Quarterly Data and Market Price Information” in Item 8 of this Annual Report at page 115, and is incorporated herein by reference. Under our primary credit facilities we are permitted to pay dividends on our common stock as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities following the payment, and certain financial tests are satisfied. On September 15, 2016, we announced a 43% increase in the quarterly cash dividend on our common stock, from $0.07 per share to $0.10 per share, beginning with the December 1, 2016 payment date. At December 31, 2016 , there were 15,129 holders of record of the 251,596,534 shares of our common stock then outstanding. The following table presents information with respect to repurchases of common stock made by us during the three months ended December 31, 2016 . Period Total Number of Shares Purchased (1) 10/1/16-10/31/16 — 11/1/16-11/30/16 4,734,989 12/1/16-12/31/16 5,074,369 Total 9,809,358 Average Price Paid Per Share $ $ Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs — — 29.54 4,734,989 $ 486,646,994 346,760,885 31.55 5,074,369 186,647,180 30.58 9,809,358 186,647,180 (1) Total number of shares purchased as part of our common stock repurchase program and delivered to us by employees as payment for the exercise price of stock options and the withholding taxes due upon the exercise of stock options or the vesting or payment of stock awards. (2) On September 18, 2013, the Board of Directors approved our common stock repurchase program. From time to time, the Board of Directors has approved increases in the amount authorized to be purchased under that program. On February 2, 2017, the Board of Directors approved a further increase in that authorization of $1.0 billion. This program expires on December 31, 2019. We intend to repurchase shares of common stock in open market transactions in order to offset new shares issued under equity compensation programs and to provide for additional shareholder returns. During the three month period ended December 31, 2016, we repurchased 9,809,358 shares at an average price, including commissions, of $30.58 per share, or $300 million in the aggregate. Since 2013, we repurchased 31,214,110 shares at an average price, including commissions, of $29.26 per share, or $913 million in the aggregate. 19 Table of Contents ITEM 6. SELECTED FINANCIAL DATA. Year Ended December 31, (1) 2016 (2) (In millions, except per share amounts) Net Sales $ 15,158 Net Income $ 1,284 Less: Minority Shareholders’ Net Income Goodyear Net Income 2015 (3) 1,264 $ Basic Diluted 16,443 307 1,264 $ $ 4.81 $ Cash Dividends Declared per Common Share Total Assets 2013 (5) 18,138 2,452 307 $ $ 1.14 4.74 $ $ 0.31 $ 16,511 2012 (6) 19,540 20,992 237 46 $ 629 2,445 $ $ 9.13 1.12 $ $ 0.25 $ 16,391 — $ 675 69 $ Less: Preferred Stock Dividends $ 2,521 69 $ Goodyear Net Income available to Common Shareholders $ 376 20 $ 2014 (4) 25 $ 212 600 $ 183 $ 2.44 $ 0.75 8.78 $ 2.28 $ 0.74 $ 0.22 $ 0.05 $ — $ 18,000 $ 17,385 $ 16,801 — 7 29 29 Goodyear Net Income available to Common Shareholders — Per Share of Common Stock: Long Term Debt and Capital Leases Due Within One Year 436 585 148 73 96 Long Term Debt and Capital Leases 4,798 5,074 6,172 6,110 4,845 Goodyear Shareholders’ Equity 4,507 3,920 3,610 1,606 370 Total Shareholders’ Equity 4,725 4,142 3,845 1,868 625 (1) Refer to “Basis of Presentation” and “Principles of Consolidation” in the Note to the Consolidated Financial Statements No. 1, Accounting Policies. (2) Goodyear net income in 2016 included net gains after-tax and minority of $499 million resulting from discrete income tax items; net gains on asset sales; and insurance recoveries for claims related to discontinued products. Goodyear net income in 2016 also included net charges after-tax and minority of $301 million due to rationalization charges, including accelerated depreciation and asset write-offs; charges related to the early repayment of debt; settlement charges related to pension plans in EMEA; an out of period adjustment in Americas related to the elimination of intracompany profit; and legal claims unrelated to operations. (3) Goodyear net income in 2015 included net charges after-tax and minority of $794 million due to the loss on the deconsolidation of our Venezuelan subsidiary; rationalization charges, including accelerated depreciation and asset write-offs; settlement charges related to pension plans in Americas; charges related to the early repayment of debt; and charges related to labor claims with respect to a previously closed facility in Greece. Goodyear net income in 2015 also included net gains after-tax and minority of $195 million resulting from royalty income related to the termination of a licensing agreement; the gain on the dissolution of the global alliance with SRI; the gain on the sale of our investment in SRI's shares; discrete income tax items; insurance recoveries for claims related to discontinued products; and the settlement of certain indirect tax claims in Americas. (4) Goodyear net income in 2014 included net charges after-tax and minority of $323 million due to changes in the exchange rate of the Venezuelan bolivar fuerte against the U.S. dollar; rationalization charges, including accelerated depreciation and asset write-offs; curtailment and settlement losses related to pension plans in the U.S. and the U.K.; charges related to labor claims with respect to a previously closed facility in Greece; charges related to a government investigation in Africa; and the settlement of certain indirect tax claims in Americas. Goodyear net income in 2014 also included net gains after-tax and minority of $1,985 million resulting from discrete income tax items, including the release of substantially all of the valuation allowance on our net deferred U.S. tax assets; and net gains on asset sales. (5) Goodyear net income in 2013 included net charges after-tax and minority of $156 million due to the devaluation of the Venezuelan bolivar fuerte against the U.S. dollar; rationalization charges, including accelerated depreciation and asset write-offs; and charges related to labor claims with respect to a previously closed facility in Greece. Goodyear net income in 2013 also included net gains after-tax and minority of $59 million resulting from certain foreign government tax 20 Table of Contents incentives, tax law changes and interest earned on favorable tax judgments; insurance recoveries for a flood in Thailand; and net gains on asset sales. (6) Goodyear net income in 2012 included net charges after-tax and minority of $325 million due to rationalization charges, including accelerated depreciation and asset write-offs; charges related to the early redemption of debt and a credit facility amendment and restatement; charges related to labor claims with respect to a previously closed facility in Greece; charges related to a tornado in the United States; settlement charges related to a pension plan; discrete charges related to income taxes; and charges related to a strike in South Africa. Goodyear net income in 2012 also included net gains after-tax and minority of $35 million related to insurance recoveries for a flood in Thailand and net gains on asset sales. 21 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 48 manufacturing facilities in 21 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa; and Asia Pacific. Effective January 1, 2016, we combined our former North America and Latin America strategic business units into one Americas strategic business unit. We have combined the North America and Latin America reportable segments effective on this date to align with the new organizational structure and the basis used for reporting to our Chief Executive Officer. This 2016 Form 10-K reflects the new segment structure, with prior periods recast for comparable disclosure. Volatile global industry conditions continued in 2016, including mixed industry conditions in Americas, where we experienced weakening demand for commercial truck tires in the United States and continuing recessionary economic conditions in Brazil, and increased competition, particularly with respect to smaller rim diameter consumer tires, in EMEA. We experienced growth in Asia Pacific driven by growth in Japan, due to the acquisition of a controlling interest in NGY, as well as China and India. In addition, we were impacted by the continued strengthening of the U.S. dollar against most foreign currencies. In order to drive future growth and address the volatile economic environment, we remain focused on our key strategies by: • Developing great products and services that anticipate and respond to the needs of consumers; • Building the value of our brand, helping our customers win in their markets, and becoming consumers’ preferred choice; and • Improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service. On September 15, 2016, we announced our 2017-2020 capital allocation plan that provides for growth capital expenditures of $1.8 billion to $1.9 billion, debt repayments of $800 million to $900 million, restructuring payments of $700 million to $800 million and, subject to our performance, common stock dividends and share repurchases of $3.5 billion to $4.0 billion. We also announced a 43% increase in the quarterly cash dividend on our common stock, from $0.07 per share to $0.10 per share, beginning with the December 1, 2016 payment date. Refer to “Liquidity and Capital Resources - Overview” for additional information. Results of Operations Our 2016 tire unit shipments were essentially flat compared to 2015. Excluding the 1.4 million unit impact of the deconsolidation of our Venezuelan subsidiary, our 2016 tire unit shipments increased by 0.8% compared to 2015. In 2016, we realized approximately $326 million of cost savings, including raw material cost saving measures of approximately $170 million, which exceeded the impact of general inflation. Our raw material costs, including cost saving measures, decreased by approximately 8% in 2016 compared to 2015. Net sales were $15,158 million in 2016 , compared to $16,443 million in 2015 . Net sales decreased in 2016 due to the deconsolidation of our Venezuelan subsidiary, unfavorable foreign currency translation, primarily in EMEA and Americas, a decline in price and product mix, primarily in EMEA and Americas, driven by the impact of lower raw material costs on pricing, lower sales in other tire-related businesses, primarily related to motorcycle tire sales in Americas due to the dissolution of the global alliance with SRI, and lower tire unit volume. Goodyear net income and Goodyear net income available to common shareholders in 2016 was $1,264 million , or $4.74 per diluted share, compared to $307 million , or $1.12 per diluted share, in 2015 . The increase in Goodyear net income and Goodyear net income available to common shareholders in 2016 was primarily driven by recognition of a loss in 2015 related to the deconsolidation of our Venezuelan subsidiary, a decrease in income tax expense in 2016, primarily due to the release of certain valuation allowances, and a decrease in pension curtailment/settlement expense. Partially offsetting these items were a reduction in royalty income due to the 2015 termination of a licensing agreement associated with the sale of our former Engineered Products business and an increase in rationalization charges, primarily related to our announced plan to close our manufacturing facility in Philippsburg, Germany. Our total segment operating income for 2016 was $1,985 million , compared to $2,020 million in 2015 . The $35 million, or 1.7%, decrease in segment operating income was due primarily to the impact of the deconsolidation of our Venezuelan subsidiary of $119 million, lower income in other tire-related business of $61 million, primarily due to decreased motorcycle tire sales as a result of the dissolution of the global alliance with SRI, unfavorable foreign currency translation of $30 million, lower volume of $24 million and an out of period adjustment of $24 million of expense related to the elimination of intracompany profit in Americas, primarily related to the years 2012 to 2015, with the majority attributable to 2012. These decreases were partially offset by lower 22 Table of Contents raw material costs of $346 million, which more than offset the effect of lower price and product mix of $178 million, and lower SAG of $56 million, primarily related to lower incentive compensation and restructuring savings. Refer to "Results of Operations — Segment Information” for additional information. Pension and Benefit Plans At December 31, 2016, our unfunded global pension liability was $669 million, compared to $642 million at December 31, 2015. Our U.S. pension strategy includes the accelerated funding of pension plans in conjunction with significantly reducing exposure in the investment portfolio of those plans to future equity market movements. The fixed income investments held for these plans are designed to offset the subsequent impact of discount rate movements on the plans’ benefit obligations so that the funded status remains stable. The strategy also provides for the opportunistic settling of pension obligations when conditions warrant. During 2013 and 2014, we contributed $2,035 million to fully fund our U.S. pension plans. Consistent with our pension strategy, we transitioned those plans’ asset allocations to a portfolio...
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