Goodyear confirms alleged ‘anticompetitive behaviour’ is why it’s ending Sumitomo alliance

Following a statement from Sumitomo and comments from Goodyear executives yesterday, later on 13 February 2014 Goodyear confirmed that it is moving to end its joint venture with Sumitomo Rubber Industries. The company also confirmed comments suggesting that the move has been precipitated by alleged anticompetitive behaviour. Writing in the company’s annual report, otherwise known as a 10K filing, company representatives said: “We have learned that SRI has engaged in anti-competitive conduct that we concluded warrants the dissolution of the global alliance”.

The 10K filing also confirmed that an arbitration process began on 10 January 2014, something that was also reported by Sumitomo and Japanese news sources reported yesterday (13 February). “On January 10, 2014, we commenced arbitration proceedings seeking the dissolution of the global alliance, damages and other appropriate relief. Although we believe that our claims are meritorious and will vigorously prosecute those claims, it is difficult to predict the timing and outcome of the proceedings.”

The filing further confirms a number of legal details relating to the alliance, which Tyres & Accessories reported on yesterday based on Goodyear’s full-year 2012 10k filing, which was published in February 2013. What’s interesting here is that there are a number of provisions for the partners to buy one another out in situations such as this.

See “Goodyear ending Sumitomo alliance due to “anti-competitive” behaviour” for more on this.

Sumitomo investment available-for-sale

According to Goodyear, the US company owned 3,421,306 shares of Sumitomo Rubber Industries, Ltd. (SRI) on 31 December 2013. The firm describes the fair value of the Sumitomo Investment as $49 million and $41 million at 31 December 2013 and 2012 respectively. Interestingly the company reports that it has classified the Sumitomo investment as “available-for-sale”. As of 31 December 2013, Goodyear reports that Accumulated Other Comprehensive Loss (AOCL) included gross unrealized holding gains on the Sumitomo Investment of $33 million ($34 million after-tax), compared to $25 million ($26 million after-tax) at December 31, 2012.