One bizarre aspect of Venezuela’s crisis has to do with automotive spare parts, and the near impossibility of replacing them. If your car battery dies, or even if you just get a flat tire, that’s it: you can kiss your car goodbye for God-only-knows how long. Why might that be?
This startling FT piece (registration required) offers some clues:
Goodyear Tire & Rubber became the latest big US company to detail damage from Venezuela’s financial crisis when the automotive tyre manufacturer reported a $646m charge against fourth-quarter earnings.
Laura Thompson, chief financial officer, said the company had been unable late last year to exchange Venezuela’s bolívar currency for dollars to purchase raw materials.
“These conditions, combined with Venezuelan regulations, have increasingly limited our ability to make and execute operational decisions at our Venezuelan subsidiary,” Ms Thompson said.
Goodyear concluded its Venezuelan operations no longer met the accounting criteria for operations under its control and had opted to deconsolidate it from its results, Ms Thompson said. The charge — $577m on a post-tax basis — pushed Goodyear into a $380m net loss for the quarter, against net income of $2.13bn for the fourth quarter of 2014. Net sales fell 6.7 per cent to $4.06bn.
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