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The Battle Plan: Goodyear Set to Finish in the Black But Won’t Declare Victory Just Yet

Goodyear Set to Finish in the Black But Won’t Declare Victory Just Yet

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“It seems clear now that Goodyear’s turnaround is underway,” said Jon Rich, president of the Goodyear Tire & Rubber Co.’s North American Tire division, at the company’s annual dealer meeting, Jan. 30-Feb., 2 in Dallas.

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Though Rich did not elaborate on still-unreleased 2004 results, he did say that, in the first nine months of 2004, operating earnings were more than double those for 2003. “We are on track in North American Tire to finish in the black for the first time since 2001,” Rich told dealers.

But Goodyear can’t afford to be smug, he cautioned. “There is a clear and important difference between confidence and arrogance,” he said. “We’ve come a long way in the past two years rebuilding the Goodyear brand, but we can’t think the battle is over.”

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Front Lines

Three decisive moves – innovation, productivity and speed – will guide Goodyear’s charge into battle, according to Rich. “We must embrace and lead rapid technological improvements in the product, which means more sizes and types of tires,” he said. “New products are going to be the lifeblood of the new Goodyear.”

Rich told dealers the company would continue to control costs and improve productivity through processes such as Lean Manufacturing and Six Sigma. “I fervently believe that, with a focus on innovation and productivity, at speeds greater than we have ever imagined, we can win in tire manufacturing in North America,” he said and added that he was “extremely bullish on 2005.”

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Rich briefly addressed some of the recent buzz surrounding a potential restructuring of Goodyear’s North American Tire division. Reports had been circulating that Goodyear was considering exiting the private label business and selling its North American agricultural division.

“Some of you have recently read or heard people speculate that we are exiting the private label business,” Rich said to dealers. “It may surprise you to know that we gained marketshare in private and associate brands in 2004, despite a 15% increase in the importation of Asian tires.” And, Rich told Tire Review in a behind-the-scenes interview that “there are no plans to reduce private brand manufacturing.”

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Regarding Goodyear’s North American ag tire unit, Rich told Tire Review: “The farm business has been difficult in North America. We haven’t made money in that segment since 1997.” Though Rich did not confirm or deny reports of a potential sale, he stated that all segments are continually being evaluated. “Everything is on the table,” he said. Goodyear will not continue to maintain “chronically unprofitable” product lines, and “we will continue to analyze all segments of the business,” he said.

Arms and Armor

Crystal clear was Goodyear’s focus on newness. Repeatedly, the company referred to itself as the “new” Goodyear, a company that would no longer introduce products only sporadically. Instead, officials said, it would adopt a new strategy that involves more accurately sensing market conditions and basing decisions on those conditions.

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Jack Winterton, vice president of consumer tire sales, stated that Goodyear made progress toward its turnaround in 2004, partly due to the launch of its Assurance line, which he called “the most sold new Goodyear premium product ever.” Goodyear sold twice the units it budgeted and ordered 50% more molds than originally scheduled, said Winterton.

Goodyear’s goal for 2005 is to leverage – and build on – that energy. “We challenged our engineers and marketing minds to keep the momentum rolling,” said Winterton. “As a result, we have some exciting new product news.”

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And exciting it was. Goodyear introduced several new tires, technologies and line extensions at the conference.

The biggest rollout, with the most accompanying fanfare, was the company’s new “SilentArmor Technology” built into new releases of its Wrangler and Fortera lines. Each re-vamped tire features an “armor zone,” consisting of a DuPont Kevlar layer, Goodyear’s Durawall rubber compound in the sidewall and a rim guard. The point of these features is to enhance durability and reduce potential curb damage, Goodyear said.

The new Fortera tire contains an additional “super absorbent layer between the tire’s tread and underlying belts,” which provides added cushion, resulting in a smooth, quiet ride, according to Goodyear.

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Twenty-four new sizes of the Wrangler will feature SilentArmor, covering a range of 15- to 17-inch wheel diameters. The new Fortera will be available in 25 new sizes, ranging from 15 to 20 inches.

And, as part of a major initiative to revitalize its Dunlop brand, Goodyear announced its fourth Dunlop tire introduction in three months – the Dunlop SP60 – an all-season, broad-market passenger tire available now in 27 sizes. The SP60 features the company’s “Traction Web” and “Mud, Snow, Ice” technologies.

The Kelly brand, too, had a shot at the limelight when Goodyear introduced two new Kelly tires – the Safari Trex, an all-terrain, light truck/SUV tire available initially in 32 sizes, and the Evo-Z, an ultra-high performance Z-speed-rated tire.

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The Safari Trex features VersaTred technology, which reportedly provides off-road traction and a quiet ride. The Evo-Z tire, available in 21 sizes, has a UTQG rating of 420 AA/A and is targeted at the tuner and sports segments, areas which had not been previously covered by Kelly, according to Brandon Stotsenburg, director of Kelly brands consumer marketing.

On the commercial side, Goodyear introduced two new mixed-service radial medium truck tires – the Unisteel G287 MSA and Unisteel G288 MSA. Both tires are available with the company’s new DuraSeal technology, which features a gel-like compound built into the tire that automatically seals tread punctures up to a quarter of an inch.

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Further bolstering its commercial business, Goodyear plans to improve productivity in its Danville, Va., Topeka, Kan., and Buffalo, N.Y., plants, according to Steve McClellan, vice president of commercial tire systems.

Reality and Dead Fish

Near the close of the conference, Bob Keegan, chairman, president and CEO of Goodyear, gave a heartfelt thanks to dealers for supporting the company through its tough times.

“We’ve made a quantum change in our capability,” said Keegan, assuring dealers that Goodyear is committed to building their businesses. “Our business is not about selling tires to you, but selling them through you,” he said. “We win when we play as a team.”

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Keegan indicated that Goodyear had been forthcoming about its issues, saying, “Bad companies put their problems under the table. Good companies put their dead fish on the table where they can see and smell them.” In other words, Goodyear has fished out its problems and is working hard to solve them. There is no room for denial or inaction. “We believe we win when we embrace action, not rhetoric,” he said, “when we adopt change and not the status quo.”

Though he said he was optimistic about 2005, Keegan reminded dealers that Goodyear is committed to confronting and addressing “reality and dead fish.”

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“Facts speak louder than words,” he said. “We will be confident, but not arrogant.”

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