No Grand Plan
Keegan, Rich Say Goodyear Dealers Will Be The Key to Turnaround
"Dealers are our most important customers. We don’t have any other customer more important that you. You are extremely important to us. If we haven’t said that recently, I’m here to say it. We love our dealers and we want you back."
Jon Rich, recently installed president of Goodyear’s North American Tire division, received a round of applause for that statement, made during his opening day speech at the tiremaker’s dealer meeting in January.
With the Akron tire company’s financial back firmly against the wall, and after years of hearing empty promises, the 1,200 Goodyear dealers gathered in Orlando wanted some reassurance that the company would survive, and that they had an important role in its turnaround.
Streamlined and straightforward, the two-and-a-half day meeting included presentations by Goodyear President and CEO Robert Keegan and key North American Tire division executives, a dealer trade fair, breakout sessions and a series of dealer focus groups with Keegan, Rich and others.
While Goodyear officials did not dwell on the company’s lingering and significant financial problems, Rich and others acknowledged past missteps and dealer disappointments, and vowed to move quickly to change.
"I know there has been a string of North American Tire presidents standing up here in the last seven years telling you about how they’re going to fix this company," said Rich. "I’d be glad if 50% of you believe what I say, and 40% of you are going to wait till I show you. And that’s OK with me. Put us to the test. Put a scorecard together. Make sure we do what we say we’re going to do."
During his speech on the second day of meetings, Keegan vowed Goodyear would survive. "With cash on hand, anticipated cash flow and available credit, we expect to meet our obligations. We will emerge as a stronger, tougher competitor, and as a better supplier for you.
"People were waiting for a grand revelation of a grand plan," Keegan volunteered.
"But a lot of our issues will not be solved by a grand revelation of a grand plan. Many of our issues are right down to the execution level. We need to work on basic blocking and tackling.
"Our plan is not about Wall Street, although we love our investors. It’s not about consumers and end-users. It’s about you. If you win, we win," he said.
Keegan said that Rich, his appointee, was "the right guy at the right time for a tough job," and that it will take a team effort to create a turnaround, but he acknowledged time was fleeting.
"We are now attacking our opportunities with a passion and with a fervor that we need," he said. "We’re going to need that passion in 2003 because it will be a year of changes, big changes. You have seen some of the changes that are already playing out publicly. There will be many more.
"There must be a sense of urgency in everything we do," Keegan said.
At the same time, dealers will be integral to Goodyear’s success, he said. "You play a critical role for us, and we need to help you build your business. You are the face of Goodyear to the consumer and end-user, and you are the face of the consumer and end-user to Goodyear. We need to spend time sharing information so we can improve."
"We have a clear three-year plan that’s going to return us from where we are today to the kind of profitability that we can be proud of, that our investors are going to be proud of and that our customers are going to be proud of," said Rich, who spoke without a script.
His four-point plan for Goodyear’s North American Tire division included:
®′ Stabilize the Unit: "We’re going to get very, very aggressive at cutting cost, and we have to make our factories competitive on a global basis. We either have to fix them or close them," he warned. Rich said Goodyear would more than double from four million to 10 million units ®“ the number of lower cost tires it imports from overseas plants. And he has taken charge of the upcoming negotiations with the United Steelworkers of America on a new master contract covering most of Goodyear’s North American tire plants.
"We need an agreement that allows us to be cost competitive in our factories, and at the same time ensure the viability of the tens of thousands of jobs. We cannot take on extra costs, and, at the same time, we really can’t sustain an extended strike."
®′ Simplify Business: Rich changed the unit’s organizational structure into three profit/loss centers for consumer tires, commercial tires, and OTR/Ag tires. The company will also streamline its supply chain "from order to cash" to improve forecasting, capacity management and fill rates. Rich also noted that 120 new Dunlop molds had been purchased and Dunlop production was expanded from two to five plants to improve fill rates on that brand.
®′ Execution: "We’re the world’s greatest planners, and we are very, very mediocre at execution. We don’t execute," said Rich, who initiated the Six Sigma process throughout the unit to improve process and product quality. In talking about product quality, Rich said, "We cannot cede the high ground to Michelin or anybody else."
®′ Grow the Business: Rich said Goodyear would grow with new products, expanded business with existing customers, and by adding point of sale, though he did not indicate whether that would include the addition of independent dealers, company-owned locations or other distribution channels.
In a private lunch with media after his speech, Rich said, "I don’t begrudge them (Goodyear dealers) where they are. They have been extremely loyal, they want us to win, and they have been promised a lot of things. We have to deliver.
"We need to see progress month over month," Rich said. "I wish I had a magic wand to waive over North American Tire to fix it overnight, but there isn’t. It’s going to take a lot of hard work."
"Dealers are not the problem with North American Tire," said Jack Winterton, director of dealer sales and consumer tires, during his presentation. "Dealers are the solution.
"We must optimize our distribution. We’re working on a new plan that will replace all current distribution plans."
Winterton, who drew applause from dealers on a number of points, outlined Goodyear’s "10 Commitments" to dealers:
1) Have fair and equitable distribution policies
2) Have fair prices on brands based on volume and services Goodyear provides
3) Right price all brands vs. competition
4) Improve fill rates
5) Enhance sales for dealers and Goodyear staff
6) Improve the G3Xpress distribution program
7) Enact equitable business planning at the dealer level, and move from transactional selling to a dealer level plan based on price and profit
8) Invest in and build all brands, including associate brands
9) Increase promotional investment in the brands
10) Continue to strengthen Goodyear’s Gemini program, which includes 1,800 points of sale, with new health benefit and training programs, and new promotional programs.
New Pricing, Promotions
"We know you’ve heard this all before. We’re just going to have to prove it to you day in and day out," said Mike Kitz, vice president of marketing and brand management, as he discussed changes to Goodyear’s pricing and marketing programs.
Using a "vehicle value model," Kitz said Goodyear would "adjust our product screen" to better define its primary brands and market segmentation. This model, he said, would help eliminate overlapping brand strategies and some pricing issues, and make it easier for dealers to help customers.
"Our pricing last year was not in line with competition," he said. "We’re going to realign pricing on critical lines and work to clean up the gray market."
In addition, Goodyear will introduce a series of new products in all lines, concentrating on "high profit and high value segments," Kitz said.
Kitz also screened all new television commercials for the Kelly and Dunlop brands, and rough for new Goodyear brand spots. After focusing on building brand names, the advertising thrust will shift to a brand/technology/value proposition. The Goodyear "Wings" campaign, for instance, will mix a tire technology element while still working to build Goodyear brand recognition.
For their part, most dealers in attendance were impressed by Goodyear’s openness. Some said that while they had heard many similar promises in the past, they sensed a level of commitment and sincerity that was missing at recent dealer meetings.