Goodyear selling rubber business as part of ‘transformation plan’

Akron, Ohio – Goodyear Tire & Rubber Co. is looking to divest its chemicals, Dunlop brand and off-road tire businesses as part of a ‘transformation plan’ to improve profitability.

In a public call 15 Nov, the US group said it expected gross proceeds of over $2 billion (€1.8 billion) from the divestment of the businesses, which also includes the group's synthetic rubber production operations.

According to its website, Goodyear’s chemicals segment includes, among other products, the manufacture of polybutadiene rubber; solution styrene butadiene rubber; emulsion styrene butadiene rubber; isoprene rubber; high solid latex as well as rubber chemicals. 

The Goodyear Forward initiative will also include “cost reduction actions” driving an annual, run-rate benefit of $1 billion by the end of 2025, the Akron-based group added.

In a statement 15 Nov, Goodyear said it had initiated “a specific and actionable cost reduction plan encompassing footprint actions and plant optimisation; purchasing; SAG; supply chain; and R&D.”

“With many unique workstreams”, Goodyear went on to say that it had “a clear line-of-sight to 100% of the cost savings.”

Furthermore, the US tire group aims to execute “top line actions” to drive an annual, run-rate benefit of $300 million by the end of 2025.

These include opportunities in North America to optimise brand and tier positioning, rationalise SKUs, increase customer and channel profitability and enhance coverage in premium product lines.

With the actions, Goodyear expects to double segment operating income margin to 10% by the end of 2025.

Net leverage, a measure of the group's ability to cover its debt from earnings, is expected to be reduced from 4x earnings to 2.0x – 2.5x earnings by the end of 2025.

“Goodyear will strengthen its financial profile through enhanced earnings, cash flow generation and debt reduction, moving the company closer toward an investment-grade rating,” the statement noted.

The group expects debt reduction of approximately $1.5 billion, net of approximately $1.1 billion for restructuring.

“Our transformation plan represents a clear path to create a more profitable and focused Goodyear,” said Goodyear chairman, CEO and president Richard Kramer, who is set to retire next year (ERJ report).

The measures, he added, aim to ‘streamline portfolio, expand margins and fortify Goodyear’s balance sheet’ to improve the group’s “leadership position” and deliver profitable growth across markets.

The action plan has been drawn up following a “deep analysis” of Goodyear’s operations by a “review committee” over a 16-week period.

The committee consisted of five directors, including two new independent directors appointed in July 2023.

The transformation plan represents “a significant set of steps toward a stronger and more profitable Goodyear”, said senior portfolio manager Marc Steinberg and portfolio manager Austin Camporin on behalf key investor Elliott Investment Management.

With the measures, said the Elliot officials, Goodyear is expected to deliver “the substantial upside value that we see for all Goodyear shareholders.”