Uncertainty at Goodyear Germany

Concern amongst Goodyear Dunlop employees is growing as rumours abound about the future direction of the company. Talk of the possible consequences is said to be weighing down on employees, resulting in a difficult working atmosphere.

The word is that Goodyear is planning to change its organisational structure in Germany at some point in the near future. The reorganisation is expected to bring the legally independent Goodyear, Fulda, Dunlop, M-Plus (associated brands) and GDHS (trade) businesses together under one roof, in a similar way to Continental’s profit centre model. If and when this happens, it is not only the managing directors who stand to lose some of their influence. There are also question marks over jobs in Hanau, Fulda and Cologne. The company’s car dealership and truck tyre businesses are already run on an integrated basis.

Despite the speculation, as it stands, the corporation cannot merge the different German companies even if it wanted to because of special tax regulations. It is assumed that Goodyear would have to ask the banks, its creditors, for approval on any changes because of its strained financial situation. Consequently, it is likely that a merger of the different companies in Germany would only be possible over a period of several years. So, in the meantime concerns and fears are being circulated as speculation.

Although Goodyear Tire & Rubber has achieved a remarkable, in the given circumstances, EBIT of about $1 billion, this figure was far smaller than analysts had initially expected and also less than competitors Michelin and Bridgestone achieved. In addition to this Goodyear has to pay by far the highest interest charges (about $400 million) of all the tyre manufacturers. After the company has paid its taxes and despite the fact that the company has put its dividend payments on hold, there isn’t much money left to decrease its $5.4 billion of corporate debts.

Now Goodyear’s boss Robert J Keegan wants to save another $750 million to $1 billion by switching production to low-cost countries, by optimising processes and by rationalising workflow. This means the pressure on the different regions is markedly increasing. In light of these cost-cutting goals, concerns about a reduction of the number of employees in Europe are a reality. Furthermore, market observers are getting the impression that the German companies will increasingly be directed through a European directorate, leaving the national organisations with less influence.