Jun 22 2006
The Goodyear Tire & Rubber Company announced today that it is withdrawing from certain segments of the private label tire business in North America.
Jonathan D. Rich, president of Goodyear's North American Tire business, said, "Today's announcement is part of our continuing strategy to focus selectively on the more profitable segments of the business. Our intention is to build upon the market strength we have established in our branded and retailer-specific product lines."
The action affects approximately 10 private label brands that are currently manufactured by Goodyear and are sold by a small number of wholesale customers to tire retailers. In 2005, this segment of the private label business represented approximately $300 million in sales and about eight million units manufactured in five North American plants, or approximately one-third of the company's private label position overall.
Over the next 12 months, Rich said the company will work closely with affected customers to help them transition to alternative Goodyear products or other sources of supply. The decision will require a corresponding reduction in Goodyear's tire manufacturing capacity in North America, he said.
"While our branded replacement business remains strong, the overall environment, including a very weak industry and continued raw material price escalation, likely will result in full year operating income for North America below 2005 levels," Rich said.
Despite the earnings pressure this year in North American Tire, Goodyear Chairman and Chief Executive Officer Robert J. Keegan reaffirmed his confidence in the overall strategic direction of the business.
"We remain confident that the strategic actions we are taking in North America will allow us to achieve 5 percent operating margins, consistent with the three to five year next stage metrics announced to investors last September," Keegan said. "These strategic actions include selectivity in the private label and original equipment businesses, expected margin improvements from new products and effective marketing, and cost improvements from expected capacity reductions, a new union contract, and reductions to selling, administrative and general expenses."
Keegan said Goodyear's operations outside of North American Tire continue to build on recent successes and that the company expects year-over-year improvement in total operating income in those businesses.