Round Two: Evans Versus Gibara

In her business column, Diane Evans asks is this a good time for a bonus? The $1.25 million bonus was for meeting cash flow and earnings targets for 2001 but Gibara has asked that the bonus be reduced in light of the company’s overall performance. The upshot is, says Evans, that Gibara will receive just over $930,000; payable when he retires.

Rather than commending Gibara for accepting less, Evans says that he is trying to play down the fact that he is getting a bonus at all, given what she describes as “Goodyear’s miserable financial performance during 2001.” She then goes on to outline what happened over the past year under Gibara’s leadership. First of all, Evans says that Goodyear lost $203.

6 million in 2001, blamed partly on a worldwide drop in sales. However, says Evans, Goodyear’s competitors Michelin and Bridgestone managed to make a profit, the latter despite the horrendous results of the US tyre recall. Thousands of Goodyear associates have lost their jobs, continues Evans, with the labour force being cut by 10 per cent.

Three rounds of job cuts saw 10,000 employees leave, mostly in Europe, and another 3,500 job cuts have been announced for this year. Evans continues with the catalogue of woes; shareholders suffered when the company cut dividends by 60 per cent; the share price suffered and two ratings services downgraded Goodyear to junk bond status. Finally, says Evans, dealers had difficulties in getting hold of some brands and sizes of tyres as Goodyear struggled to maintain fill rates.

Having said all that, Evans said that analysts reacted positively when Gibara promised that results would improve this year. She ends her article with the hope that the worst is over, as Goodyear’s contribution to the Akron economy is vital and the company’s generosity to the community is unrivalled. A great company, she says, needs great leadership for everyone to benefit and executive bonuses are a good way to reward those who lead companies into prosperity.

Evans finishes the article with the pointed remark: “Bonuses are fine – when everyone is winning”. Evans’s stance may sound more European than American, but it is not the complete story. It is becoming increasingly obvious that a struggle is going on behind the scenes between Gibara and Keegan.

When Keegan joined the company, he was promised some million dollars if he was not the one to succeed Gibara when the latter retired. Keegan also received 50,000 Goodyear shares at a price of one Dollar each. Currently, these are worth $1.

4 million. Other managers are waiting to see who will win, but in the opinion of many (including some big OE customers) Gibara will win, if indeed he has not already done so. When Keegan first arrived, the welcome was a warm one, as everybody realised that improvements were badly needed.

However, according to some managers, this honeymoon period did not last long, and Keegan was criticised for bringing in directors from candy companies and businesses like Proctor & Gamble to fill top marketing positions, not only in the US, but worldwide. This resulted in long-serving, middle-aged middle management frustrated as they saw their route to promotion closed off. It is no secret that many of these are looking around for opportunities outside Goodyear.

As somebody, who did not want to be identified, told us, “it is a moot question whether you can manage a tyre company in the same way as a candy company. Whether the Candyman can – and what he can – he will have to show us.”.