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Pace of Change: Goodyear Outlines Phase Two of Turnaround Plan at Annual Dealer Meeting

Goodyear Outlines Phase Two of Turnaround Plan at Annual Dealer Meeting

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Sometimes we don’t realize how fleeting life is until we are on the brink of death. That’s how Goodyear Tire & Rubber Co. executives felt when the tiremaker’s ailing North American tire division was struggling just to breathe. That was nearly three years ago.

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Today, the division is out of intensive care but still in recovery. “We were successful because you were successful,” Jon Rich, president of Goodyear’s North American Tire division, told dealers at the company’s Feb. 2-5 dealer meeting in Nashville, Tenn.

Though full-year results weren’t available at press time (They were slated to be released Feb. 16.), Rich said 2005 was a good year for Goodyear. Thanks in part to the successful launches of the new Assurance, Wrangler and Fortera tires, sales in North America increased 7% for the first nine months of 2005, and both earnings and margins doubled during that time. “We are pleased with our turnaround efforts,” Rich commented.

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But pleased doesn’t mean satisfied. “Let me assure you that we will never rest on our accomplishments,” Rich told dealers.

This year, Goodyear closes the book on Phase One and enters Phase Two of its turnaround. This second stage will be defined by innovation and high-speed change, officials said. The two components, emphasized by the “Mission: Innovation” theme of the meeting, will drive all Phase Two goals and initiatives.

Bob Keegan, Goodyear’s chairman and CEO, outlined four of those goals, which he called “critical initiatives for Phase Two.” They include: creating new products and taking both quality and performance of those products to unprecedented levels; significantly improving marketing programs to help dealers build their top and bottom lines; driving cost structure down to very competitive levels; and significantly improving the balance sheet and capital structure.

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“‘Mission: Innovation’ is mission critical,” said Keegan. “Innovation is in our DNA; it’s the cornerstone of our company.” Keegan explained that innovation, for Goodyear, doesn’t just mean new products. “We think about high-impact change across everything we do – from selling and marketing to R&D and manufacturing, logistics, finance, human resources and even labor relations,” he said. “If we’re not innovative across that whole business system, we’re not going to achieve our goal of being the best in the industry.”

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Trends Driving Change

The market continues to fluctuate rapidly, according to Keegan, and Goodyear must keep up its pace to remain successful. “There is no aspect of our business that isn’t changing rapidly today,” Keegan said. “Change is our ally,” he continued. “We will take advantage of change.”

Four major trends are rapidly transforming the tire industry, said Larry Mason, president of Goodyear’s North American consumer tire business. The impact of the Internet; the increasing influence of women tire buyers; continuing size proliferation and media bombardment are changing the business of selling tires at its most fundamental levels.

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Keegan said the mission of Phase Two is to benefit from these trends by first embracing change, then identifying the right target markets and consumer segments for new products and marrying advanced technology to those segments.

“Introducing new products with values and features that consumers understand and will pay for is critical,” Rich noted. “Over the past three years, we have proven that we can create innovative new products that sell. And, the underlying technology behind the innovation literally is rocket science.”

New Rollouts

To that end, Goodyear introduced several new tires under the Goodyear, Dunlop and Kelly brands and also debuted an all-new brand at the dealer meeting.

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The new Goodyear Eagle tire featuring “ResponsEdge Technology,” Dunlop SP WinterSport 3D winter high performance tire, Dunlop Signature luxury touring broadmarket tire and the Kelly Navigator Touring Gold premium touring tire were introduced to dealers.

And, the new brand Fierce – available initially to Kelly dealers – also made its debut in Nashville.

Bob Toth, Goodyear’s marketing manager for high performance and passenger tires, officially launched the new Eagle tire, which uses carbon fiber as a reinforcement to stiffen the outboard sidewall. The tire’s belt package also includes a shock-absorbing “InsuLayer” made with DuPont Kevlar.

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The new Eagle tire will be in production in March, and the first tires will ship on May 1. Initially, 24 H- and V-rated sizes will be available, and five additional V-rated sizes will be introduced in the fall. A nationwide dealer training program will start the week of Apr. 3, and, starting in May, dealers will have the chance to test the new tires at ride-and-drive events.

The new Eagle featuring ResponsEdge Technology specifically targets the high performance touring market, which encompasses more than 50% of the broad H-speed-rated-and-higher tire segment, according to Toth.

To beef up the Dunlop brand, Goodyear introduced its new Dunlop SP WinterSport 3D tire that will be available in 22 sizes for the 2006-2007 winter season. The new tire features what Goodyear calls “3D sipes,” designed to “enhance grip for performance and ultra-performance sports cars.”

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Three types of sipes – collectively called the “Active Traction Sipe System” – are each designed for changing weather conditions. At lower speeds, the shoulder sipes open to provide more biting edges, according to Goodyear. At high speeds, or under high loads, the sipes close up to provide shoulder rigidity. In the center block, sipes assist with traction and braking on ice and snow, and in the intermediate blocks, high-amplitude sipes assist lateral stability and control in wet and slushy conditions.

The next new Dunlop tire, the all-season Signature tire, is designed for fitments on standard and luxury passenger cars and is available in 28 sizes and three speed ratings. T-speed rated tires are backed by a 75,000-mile tread life limited warranty, and H- and V-rated sizes offer a 60,000-mile tread life limited warranty.

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Signature features Goodyear’s multi-pitch tread design technology for noise reduction and jointless band technology for performance at highway speeds, uniformity and long treadwear, Andy Traicoff, Dunlop brand director, told dealers.

Designed for those who “enjoy the drive,” the new tire targets the touring tire market, which has grown 14% over the last five years, Traicoff said.

And, the new Kelly Navigator Touring Gold premium touring tire, featuring a 60,000-mile limited tread life warranty, is available in 17 H- and V-speed rated sizes. More sizes will be introduced during the second half of 2006, Goodyear said.

Finally, Goodyear debuted an all-new brand – Fierce – which targets the ultra-high performance, high performance and sport truck tuner markets. Fierce is available in three lines – Fierce UHP (20 sizes), Fierce HP (16 sizes) and Fierce ST (three sizes). In 2006, nine more sizes will be added to the HP line, 10 to the UHP line and 13 to the SP line, according to Chris Magana, marketing manager for the Kelly brand. The HP and UHP lines are available in aspect ratios as low as 35.

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Magana said Goodyear expects Fierce to compete with Bridgestone/Firestone North American Tire’s Fuzion tuner tire brand, among others. Though available initially to Kelly dealers, Fierce will maintain its own identity as a separate brand, Magana said.

And, in the near future, dealers can also expect to see a new line of fuel-efficient commercial tires using Goodyear’s “Fuel Max Technology,” according to Steve McClellan, vice president of commercial tire systems, as well as new urban and mixed-service Dunlop commercial tires.

Within Reach?

All of these new tire launches support Goodyear’s Phase Two mission – to embrace and leverage changes in the tire industry that will make the tiremaker and its dealers profitable, Goodyear said.

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Success in Phase Two, according to Rich, will be within reach when the company is achieving operating margins of at least 5%, a goal introduced at Goodyear investors’ meeting last September.

Keegan told dealers that they can expect to see a more aggressive Goodyear in the years to come, a market-driven company that embraces change, not just for survival’s sake, but to uncover new possibilities.

“Goodyear is moving from changing for survival to changing to see what’s possible,” said Jack Winterton, Goodyear’s vice president of consumer tire sales.

“We do not see ourselves as an auto supplier as some would characterize us,” Keegan told dealers. “We don’t really see ourselves as a tire company as many would characterize us. We see ourselves as an aggressive marketing company. We are aggressive marketers. That is a huge change for us.”

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Despite some optimism, Goodyear executives remain firmly planted in reality. “As I look to the future, I am confidently paranoid,” said Keegan. “I have confidence in the leadership at Goodyear and in its dealers, but I am also a realist. Given the pace of change that we will see in our market, and the creativity we’re going to have to have to deal with those changes, I think it’s appropriate that we remain just a little bit paranoid.

“Get as comfortable as you can with the pace of change,” Keegan advised dealers. “That is our future. And, it is dictated by the only forces that matter – market forces.”

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