Goodyear Plans 'Strategic Alternatives' to Dunlop, OTR, Chemical Businesses

Goodyear Plans ‘Strategic Alternatives’ to Dunlop, OTR, Chemical Businesses

The company believes divesting these areas of focus could result in excess of $2 billion from portfolio optimization.

The Goodyear Tire & Rubber Company introduced a new strategic plan called “Goodyear Forward” following a comprehensive review by its board of directors and an independent review committee. Goodyear said the multi-faceted plan aims to optimize Goodyear’s portfolio, expand margins, reduce debt and enhance shareholder value. Part of the plan includes pursuing “strategic alternatives” for its chemical business, the Dunlop brand and the off-the-road equipment tire business. The company expects the plan to produce gross proceeds in excess of $2 billion from portfolio optimization, as well as top-line and cost-reduction actions totaling $1.3 billion by end of 2025.

The Review Committee consisted of five directors, including two new independent directors appointed in July 2023. Over the course of 16 weeks, the Review Committee engaged in deep analysis and deliberation with assistance from industry-leading financial advisors and consultants, Goodyear said. Goodyear said the full board will oversee the execution of the “Goodyear Forward” plan and remains committed to the ongoing assessment of value-enhancing opportunities.

According to Goodyear, “Goodyear Forward” will deliver:

  • Gross proceeds in excess of $2 billion from portfolio optimization: Goodyear will actively pursue strategic alternatives for its Chemical business, the Dunlop brand and the Off-the-Road equipment tire business.
  • Cost reduction actions driving an annual, run-rate benefit of $1 billion by the end of 2025: The company says it has initiated a specific and actionable cost reduction plan encompassing footprint actions and plant optimization; purchasing; SAG; supply chain; and R&D.
  • Top line actions driving an annual, run-rate benefit of $300 million by the end of 2025: The company says it has identified opportunities in North America to optimize brand and tier positioning, rationalize SKUs, increase customer and channel profitability and enhance coverage in premium product lines.
  • Segment operating income margin doubling to 10% by the end of 2025: With the benefits of cost reduction and top-line actions, and net of the impact of expected asset sales and inflation, the company says it expects segment operating margin to double from approximately 5% in 2023 to 10% by the fourth quarter of 2025.
  • Net leverage of 2.0x – 2.5x by the end of 2025: Goodyear hopes to strengthen its financial profile through enhanced earnings, cash flow generation and debt reduction, moving the company closer toward an investment-grade rating. The company expects a debt reduction of approximately $1.5 billion, net of approximately $1.1 billion for restructuring.

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