NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (the “Company,” “Goodyear,” “we,” “us” or “our”) in accordance with Securities and Exchange Commission rules and regulations and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “ 2011 Form 10-K”).

We are a party to shareholder agreements concerning certain of our less-than-wholly-owned consolidated subsidiaries. Under the terms of certain of these agreements, the minority shareholders have the right to require us to purchase their ownership interests in the respective subsidiaries if there is a change in control of Goodyear or a bankruptcy of Goodyear. Accordingly, we have reported the minority equity in those subsidiaries outside of Shareholders’ Equity.

Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2012 .

Recently Issued Accounting Standards

In December 2011, the Financial Accounting Standards Board ("FASB") issued an accounting standards update requiring new disclosures about financial instruments and derivative instruments that are either offset by or subject to an enforceable master netting arrangement or similar agreement. The standards update is effective for fiscal years beginning after December 15, 2012. We are currently evaluating the impact of adopting this standard on our consolidated financial statements.

In July 2012, the FASB issued an accounting standards update with new guidance on annual impairment testing of indefinite-lived intangible assets. The standards update allows an entity to first assess qualitative factors to determine if it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If based on its qualitative assessment an entity concludes it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if an entity concludes otherwise, quantitative impairment testing is not required. The standards update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. We are currently evaluating the impact of adopting this standard.

Recently Adopted Accounting Standards

Effective January 1, 2012, we adopted an accounting standards update with new guidance on fair value measurement and disclosure requirements. This standard provides guidance on the application of fair value accounting where it is already required or permitted by other standards. This standard also requires additional disclosures related to transfers of financial instruments within the fair value hierarchy and quantitative and qualitative disclosures related to significant unobservable inputs. The adoption of this standard did not have a material impact on our consolidated financial statements.

Effective January 1, 2012, we adopted accounting standards updates with guidance on the presentation of other comprehensive income. These standards require an entity to either present components of net income and other comprehensive income in one continuous statement or in two separate but consecutive statements. Accordingly, we have presented net income and other comprehensive income in two consecutive statements.

Reclassifications and Adjustments

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation. In the first quarter of 2012 , we recorded an out of period adjustment of $13 million of additional interest expense to correct capitalized interest recorded in prior periods.

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

During the second quarter of 2012 , net rationalization charges of $26 million were recorded. New charges of $27 million were comprised of $11 million for plans initiated in 2012 , consisting of $6 million of associate severance costs and $5 million for other exit and non-cancelable lease costs, and $16 million for plans initiated in prior years, consisting of $10 million of associate severance and other related costs and $6 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of the new charges relate to future cash outflows. The net charges in 2012 also included the reversal of $1 million of charges for actions no longer needed for their originally intended purposes.

During the first six months of 2012 , net rationalization charges of $41 million were recorded. New charges of $43 million were comprised of $18 million for plans initiated in 2012 , consisting of $11 million of associate severance costs and $7 million for other exit and non-cancelable lease costs, and $25 million for plans initiated in prior years, consisting of $11 million of associate severance and other related costs and $14 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of the new charges relate to future cash outflows. The net charges in the first six months of 2012 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 700 associates will be released under 2012 plans, of which approximately 300 associates have been released as of June 30, 2012.

In the first six months of 2012 , $34 million was incurred for associate severance payments, including a favorable impact of $3 million of foreign currency translation, and $16 million was incurred for other exit and non-cancelable lease costs.

The accrual balance of $175 million at June 30, 2012 consists of $154 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $21 million primarily for other exit and non-cancelable lease costs. At June 30, 2012 , $94 million and $32 million , respectively, of the accrual balance relates to plans associated with the announced discontinuation of consumer tire production at one of our facilities in Amiens, France and the closure of our Union City, Tennessee manufacturing facility.

Accelerated depreciation charges of $4 million and $6 million were recorded in cost of goods sold (“CGS”) in the three and six months ended June 30, 2012 , respectively, and were related primarily to property and equipment in our Dalian, China manufacturing facility.

In the second quarter of 2011 , net rationalization charges of $46 million were recorded. New charges of $46 million were comprised of $11 million for plans initiated in 2011 , consisting of $10 million of associate severance costs and $1 million for other exit and

non-cancelable lease costs, and $35 million for plans initiated in prior years, consisting of $29 million for associate severance costs and $6 million for other exit and non-cancelable lease costs. Substantially all of these charges related to future cash outflows.

For the first six months of 2011 , net rationalization charges of $55 million were recorded. New charges of $57 million were comprised of $12 million for plans initiated in 2011 , consisting of $11 million of associate severance costs and $1 million for other exit and non-cancelable lease costs, and $45 million for plans initiated in prior years, consisting of $30 million for associate severance costs and $15 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of these charges related to future cash outflows. The net charges in the first six months of 2011 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 500 associates will be released under plans initiated in 2011 , of which approximately 200 associates have been released as of June 30, 2012 . In addition, there are approximately 900 associates to be released under prior year plans, primarily related to the discontinuation of consumer tire production at one of our facilities in Amiens, France.

Asset write-offs and accelerated depreciation charges of $25 million and $34 million were recorded in CGS in the three and six months ended June 30, 2011 , respectively, and were primarily related to property and equipment in our Union City, Tennessee manufacturing facility.

Financing fees were $34 million in the second quarter of 2012 , compared to $63 million in the second quarter of 2011 . The second quarter of 2012 included $24 million of debt issuance costs primarily related to the amendment and restatement of our U.S. second lien term loan facility. The second quarter of 2011 included $53 million of charges related to the redemption of $350 million in aggregate principal amount of our outstanding 10.5% senior notes due 2016 , of which $37 million related to cash premiums paid on the redemption and $16 million related to the write-off of deferred financing fees and unamortized discount. Financing fees were $129 million in the first six months of 2012 , compared to $72 million in the first six months of 2011 . Financing fees in 2012 also included $86 million of first quarter charges related to the redemption of $650 million in aggregate principal amount of our outstanding 10.5% senior notes due 2016 , of which $59 million related to cash premiums paid on the redemption and $27 million related to the write-off of unamortized discount and deferred financing fees. Financing fees in 2011 included the previously mentioned second quarter charges. Financing fees and financial instruments consists of the amortization of deferred financing fees, commitment fees and other charges incurred in connection with financing transactions.

Net foreign currency exchange losses were $6 million in the second quarter of 2012 and the second quarter of 2011 . Foreign currency exchange losses in the first six months of 2012 were $17 million , compared to $9 million in the first six months of 2011 . Foreign currency exchange in all periods reflects net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions worldwide.

Net gains on asset sales were $13 million in the second quarter of 2012, compared to net gains on asset sales of $11 million in the second quarter of 2011. Net gains on asset sales were $17 million in the first six months of 2012 , compared to net gains on asset sales of $13 million in the first six months of 2011 . Net gains on asset sales in 2012 included second quarter gains on the sale of a minority interest in a retail business in Europe, Middle East and Africa Tire ("EMEA") and the sale of certain assets related to our bias truck tire business in Latin American Tire, and a first quarter gain on the sale of property in North American Tire. Net gains on asset sales in 2011 included second quarter gains on the sale of the farm tire business in Latin American Tire and the recognition of a deferred gain from the sale of property in North American Tire.

General and product liability — discontinued products includes charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries. We recorded $2 million and $6 million of expense related to asbestos claims in the second quarter 2012 and 2011 , respectively. In addition, we recorded $2 million and $3 million of income related to probable insurance recoveries in the second quarter of 2012 and 2011 , respectively. We recorded $6 million and $11 million of expense related to asbestos claims in the first six months of 2012 and 2011 , respectively. In addition, we recorded $4 million and $5 million of income related to probable insurance recoveries in the first six months of 2012 and 2011 , respectively.

Royalty income is derived primarily from licensing arrangements related to divested businesses. Interest income consists primarily of amounts earned on cash deposits. Miscellaneous in 2012 includes a second quarter charge of $20 million related to labor claims in EMEA.

NOTE 4. INCOME TAXES

In the second quarter of 2012 , we recorded tax expense of $63 million on income before income taxes of $166 million . For the first six months of 2012 , we recorded tax expense of $111 million on income before income taxes of $222 million . Income tax expense for the first six months of 2012 was unfavorably impacted by $6 million due primarily to the settlement of prior tax years. We record taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory rate was primarily attributable to continuing to maintain a full valuation allowance against our net deferred tax assets in certain international subsidiaries.

In the second quarter of 2011 , we recorded tax expense of $64 million on income before income taxes of $120 million . For the first six months of 2011 , we recorded tax expense of $126 million on income before income taxes of $306 million . Income tax expense for the first six months of 2011 was unfavorably impacted by $18 million due primarily to the settlement of prior tax years and to increased tax reserves as a result of negative tax court rulings in a foreign jurisdiction.

At January 1, 2012 , we had unrecognized tax benefits of $90 million that, if recognized, would have a favorable impact on our tax expense of $84 million . We had accrued interest of $24 million as of January 1, 2012 . If not favorably settled, $23 million of the unrecognized tax benefits and all of the accrued interest would require the use of our cash. It is reasonably possible that our unrecognized tax benefits may change during the next 12 months. However, we do not expect changes during the next 12 months to have a significant impact on our financial position or results of operations.

Generally, years beginning after 2006 are still open to examination by foreign taxing authorities, including in Germany. In the United States, we are open to examination for 2011.

Weighted average shares outstanding - diluted for the six months ended June 30, 2012 excludes the effect of approximately 34 million equivalent shares related to the mandatory convertible preferred stock as their inclusion would have been anti-dilutive. In addition, Goodyear net income used to compute earnings per common share - diluted for the six months ended June 30, 2012 is reduced by $15 million of preferred stock dividends since the inclusion of the related shares of preferred stock would have been anti-dilutive. Additionally, weighted average shares outstanding - diluted for the three and six months ended June 30, 2012 excludes approximately 11 million equivalent shares related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options).

Weighted average shares outstanding - diluted for the three months ended June 30, 2011 excludes the effect of approximately 30 million equivalent shares related to the mandatory convertible preferred stock as their inclusion would have been anti-dilutive. In addition, Goodyear net income used to compute earnings per common share - diluted for the three months ended June 30, 2011 is reduced by $7 million of preferred stock dividends since the inclusion of the related shares of preferred stock would have been anti-dilutive. Additionally, weighted average shares outstanding - diluted for the three and six months ended June 30, 2011 excludes approximately 6 million and 7 million equivalent shares, respectively, related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options).

Rationalizations, as described in Note 2, Costs Associated with Rationalization Programs, net gains on asset sales, as described in Note 3, Other (Income) and Expense, and asset write-offs and accelerated depreciation are not charged (credited) to the strategic business units (“SBUs”) for performance evaluation purposes, but were attributable to the SBUs as follows: