Kramer outlines plan for Goodyear in N.A.

Akron, Ohio -- Goodyear's Rich Kramer has a boatload of projects he'd like to tackle.

The short list includes upgrading facilities; increasing plant capabilities; becoming more competitive in the marketplace; improving efficiencies within the company's factories; developing a formula that matches the right volume with the right markets at the right price; continuing to build the right teams; and boosting profitability.

Each of those is in the works, according to the president of Goodyear's North American Tire unit, who replaced Jon Rich in the top spot less than a year ago.

Kramer has been moving at an ambitious pace since he took the helm, a company spokesman said. Goodyear ended tire production at its Tyler, Texas, plant in late December, with 600-650 jobs lost through layoffs, retirements and transfers to other facilities. The facility will continue to operate as a rubber mixing center manned by 135 employees.

The firm has been adding equipment at and modernizing its Fayetteville, N.C., plant, while its Gadsden, Ala., passenger and light truck factory is undergoing a major expansion, according to Kramer. Both are part of an investment plan-which could total as much as $1 billion, according to a letter sent to suppliers in late November-for the company's U.S. and Canadian facilities aimed at building its North American business.

“Generally speaking, the investment is to enhance the capabilities of our existing factories to make the products that our customers and consumers want,” he said.

“We've always invested in our facilities in North America, and we are making sure that we are making products that respond to demand.

“The investment covers everything from being sure that the equipment we have runs more efficiently and is better maintained to increasing our capacity to manufacturing products with larger rim diameters, for example.”

In addition, he said the company is always looking for ways to become more efficient. Basically, it wants to get more product out of its factories as efficiently as possible as opposed to its focus of a few years ago on closing plants, trying to stay afloat and redoing the firm's union pension plan so that it is fair to all.

Upbeat work force

Sitting in his office at Goodyear's Akron headquarters, Kramer is upbeat, quick-witted and focused. He's also a people person, according to a former Goodyear employee. That's not the typical image associated with a man who has spent much of his career poring over corporate financial ledgers.

But Kramer isn't your stereotypical financial type, either. “He's a hard worker, smart and he makes himself accessible to everyone,” the former employee said.

“I'm really motivated most by three things,” Kramer said. “The first is building a team and seeing people succeed, whether they are our associates or our customers. Second, I'm motivated by tough challenges. And third is a focus on continuous improvement. There's no finish line with performance, and our goal is to be the best-performing tire company in North America.”

Kramer, an eight-year Goodyear veteran, was in management during the difficult financial times of the early 2000s. He first served as vice president of finance for North American Tire and, beginning in 2003 when the turnaround began, senior vice president for strategic planning and restructuring.

While the business is in the black, the turnaround continues today. Kramer admitted there is plenty of room for improvement but most of the heavy lifting is out of the way.

“We executed very well last year coming out of the strike,” he said, referring to the 86-day strike in late 2006 by the United Steelworkers at 16 Goodyear sites in North America. Since then the company has created a better product mix and built up the Goodyear brand, which, he noted, helped improve the bottom line.

He believes the business will continue to gain ground in 2008 and praised the attitude of employees throughout North American Tire. In particular, he cited the enthusiasm of the workers at Goodyear's Gadsden and Fayetteville factories.

At Gadsden, “you just couldn't find more dedicated, excited individuals who want to go and make the things we're doing at the plant work. Fayetteville is the same way.”

Because of that type of attitude along with existing opportunities, investments in the plants and new products, he believes Goodyear can be very competitive in North America.

No easy fix

On the negative side, Goodyear and all other tire makers are scrambling to offset rising material prices, which are at historic levels, and rubber prices in the $1.30-per-pound range.

“Raw materials in total represent approximately 40 percent of our cost of goods sold,” Kramer said.

“Based on that percentage, our raw material cost for 2007 was approximately $6.4 billion. On our fourth-quarter conference call, we said that we expected raw material costs to increase between 7 and 8 percent in 2008, which would imply an increase of approximately $500 million.”

To offset the cost increases, Kramer said Goodyear looks inward to bring down its own costs “and get as efficient as we can be. We don't take an attitude that as costs go up, you just pass it on to the customer. We have a number of continuous improvement initiatives under way.

“What really is exciting is when you get your people together and say 'Here's the head wind on our costs, what can we do to offset that?' And they figure out ways.”

Once it has exhausted all avenues to cut costs, he said, the tire maker passes the price hikes along and deals with that situation.

Goodyear does have an advantage over most other tire makers in that it has its own chemical manufacturing business, although it still must go to the open market for butadiene and other synthetic rubber materials.

“You put the smartest people in a room to deal with it, and they're dealing with it,” Kramer said, without elaborating. He said the demand for commodities will continue, so pricing for raw materials isn't going to get better any time soon.

“If you're counting on these things correcting themselves, it's not going to happen. That's the environment we're operating in. It puts a premium on our efficiency to deal with it,” not just in the U.S. but around the world.

Goodyear and North American Tire constantly remain flexible, Kramer said. For instance, he said the company constantly reviews its overseas production versus its U.S. costs.

The economies have changed in the last few years, he said, including the value of the dollar, cost of transportation and the cost of overseas production.

“Labor costs are the big difference now,” he said. “But when you add in all the costs (involved in overseas manufacturing), you get a different answer today than you did three to four years ago.”

Remaining flexible when dealing with issues like that is the key, he maintained.

“Nothing lasts forever. You have to be able to react to market conditions, whether that's sourcing, whether that's people, whatever,” Kramer said.

“You must continuously go back and update your thinking.”

From Rubber & Plastics News (A Crain publication)