Goodyear EMEA: Transforming the organisation, optimising manufacturing and focusing the brand portfolio

Repeated loss-making quarterly results paired with global cost-cutting and headcount-reduction efforts throughout 2023 mean Goodyear has, understandably, received more attention than usual. Most of this has come from our own research, in response to third-party action – such as Elliott’s now-infamous letter – and off the back of the aforementioned financial results. Since all of the above reasons for writing about Goodyear particularly impact Europe, in mid-October Tyres & Accessories visited the Goodyear EMEA headquarters in Brussels, Belgium, to hear more about exactly how executives are leading the business through its current tumultuous times. The group of executives Tyres & Accessories met with specifically included David Anckaert, Goodyear EMEA vice-president, consumer; and Troy Scully, vice president, communications and public affairs EMEA. Not only does such an opportunity give Goodyear the right-to-reply, it also provides additional insights into the company’s current “transformation” plans. Indeed, that is where our discussion began, with David Anckaert explaining what is meant by transformation in EMEA.

But first some context. Everything that is happening now is taking place in an undeniably “challenging environment”. The compound impact of the Covid-19 pandemic, supply chain disruptions, increased energy and raw materials costs as well as constricted vehicle production is well-documented. More recently, the pressure of low-cost imports combined with higher labour costs has returned to the fore. Indeed, it is worth saying that the impact of increasing numbers of low-cost imports can now also be seen at the OEM level where vehicle makers such as BYD, Link & Co and Geely are increasingly gaining a foothold. Now, the knock-on effects of the war in Ukraine and the related energy cost crisis paired with generally high inflation levels have come into the picture as well. In short, businesses have to adapt to the circumstances and for Goodyear that means transformation of its EMEA business organisation, optimising the European manufacturing footprint and re-evaluating its brand portfolio.

These are “never lightweight decisions…it is not just about cost, but how we are best set up to capture the value in the market…”, David Anckaert, Goodyear EMEA vice-president.

Transformation and headcount reduction

The subject of transformation is unarguably connected with job losses as Goodyear EMEA’s September announcement that it is consulting on 1,200 job cuts testifies. However, as the simultaneously announced creation of 480 jobs also testifies, there is more to it than that. These are “never lightweight decisions,” David Anckaert explained, adding that “it is not just about cost, but how we are best set up to capture the value in the market…we have to understand how we can be more agile as a company.”

Anckaert continued elaborating by centring the Goodyear EMEA business transformation process on four goals. Firstly, “improved capability to work at the intersection and link market insights to product, marketing and operations”. That point seeks to explain how the transformation strategy is designed to address the macroeconomic effects that have precipitated the need for transformation – the perfect storm of pandemic, war and other prevailing winds impacting the market mentioned earlier.

Then there’s the establishment of “customer centric teams around the largest profit centres and growth opportunities”. That latter point and “reduced layers with clear roles and responsibilities across all EMEA” go some way towards explaining how job cuts will be made. To give a purely illustrative example, why have five hypothetical managers overseeing seven team members when one or two can do that?

The fourth and final goal within “business transformation” relates to how the already-announced changes will result in more efficient operation. In short, Goodyear EMEA will adopt “standard processes with centres of excellence…to drive efficiency”.

Those goals result in five key actions:

1. Streamlining the EMEA division around two product business units (PBU) – a Consumer EMEA PBU and a Commercial EMEA PBU – to centrally design products and integrate brand, capital and manufacturing strategies across the region.
2. Simplifying customer-facing teams with fewer decision-making layers, making Goodyear EMEA more agile to anticipate and respond to customer requests and market opportunities.
3. Consolidating EMEA R&D activities in Luxembourg, leading to a reduction of R&D activities in Hanau, Germany.
4. Centralising corporate functions and standardising end-to-end processes, using Goodyear’s Global Business Services (GBS) organisation.
5. Improving procurement through strategic sourcing and streamlined catalogue purchases.

At this point, it is worth taking a closer look at what this all means in terms of personnel numbers. There are around 22,000 associates in total in Goodyear EMEA. This includes approximately 17,000 associates within manufacturing plants and 1,100 associates within R&D facilities. There are 3,900 associates in sales, administration and general (SAG) positions across the region.

Of the total 22,000 associates, approximately 5,000 are in Germany (across all locations and job types). With Germany the largest market and representing the largest single concentration of workers, it is therefore likely that Germany will also be the most impacted – in purely numerical terms, at least.

A further roughly 3,500 associates can currently be found in Luxembourg (across all locations and job types).

The above-mentioned business transformation actions mean 1,200 roles are “at risk” in the planned headcount reduction plans. But executives also point out that this figure is at the top end of estimates since it was based on a 2022 baseline. Furthermore, at least partly due to a strategic recruitment freeze enacted in advance of the announced headcount reduction plans, 250 of these roles are current vacancies – something that mitigates the impact on current employees.

Meanwhile, about 480 new positions will be created as a result of the business transformation project. Most of these roles will be based in the Global Business Service Centre in Bucharest, but not all of them.

Manufacturing optimisation

Goodyear arguably is most concise on the subject of manufacturing optimisation. The official line is: “We are conducting a review of our manufacturing and warehousing footprint in EMEA.” That means executives are explicitly working towards “reducing our high-cost capacity and modernising our footprint”. Alongside that is the very specific goal of reducing consumer tyre (specifically passenger car and light truck tyre) conversion cost per tyre by $3.00 within EMEA over the next five years. Two points are worth clarifying here. Firstly, the $3-dollar reduction once again refers to a 2022 baseline. And secondly, the term “conversion costs” refers to the cost of turning input materials into tyres – in other words, that means making the manufacturing process itself more efficient. If material costs are taken out of the equation, energy and labour costs as well as manufacturing efficiency are the biggest levers available. And it has to be said that labour is significantly cheaper in some countries within EMEA than others – such as Germany – where Goodyear already has a big manufacturing footprint.

Premiumising Goodyear

The final area of transformation relates to Goodyear’s brand portfolio. In the interests of clarity, we’re focusing specifically on Goodyear’s EMEA brand portfolio since the global brand basket is even bigger. As both Elliott’s letter and our previously-published critical evaluation of that thesis found, Goodyear would benefit from rationalising its position concerning its various brands.

And that is exactly what Goodyear EMEA executives have sought to do. In short, Goodyear is being re-premiumised in relation to Dunlop and clear water is being made between Goodyear and Dunlop in both price and product position terms.

Consumer research conducted by IPSOS on behalf of Goodyear played a role in the repositioning of Goodyear at the top of the brand basket as well as the clarification of Dunlop and as what might be called an extra value brand beneath Goodyear

For their part, Goodyear executives explained that Goodyear aims to offer “its most competitive portfolio of premium, value, and budget brands that can meet the needs of any type of consumer in an evolving market”.

To that end, “the Goodyear brand will stand alone with a unique premium positioning, for consumers who want to upgrade their driving experience”. That strategic gear change means the performance sentiments previously associated with Dunlop will now be incorporated into the Goodyear brand.

In other words, “as the fastest-growing premium brand in Europe, [Goodyear’s] current range offers its strongest ever tyre line-up. Goodyear will continue to offer award-winning products like the Vector 4Seasons, Eagle F1 Asymmetric 6 and UltraGrip Performance feature cutting-edge technologies and innovations, competing head-to-head with Michelin, Bridgestone, and Continental”, executives explained.

Dunlop will “receive renewed focus and investment as a strategic player within the high-end value segment of the market, appealing to drivers looking for long-lasting quality at a fair price.” That repositioning, say executives, makes Dunlop “the strongest brand in its segment by awareness and purchase consideration”. The Dunlop car tyre line-up will therefore expand to cover 84 per cent of the market from 2024, with a range of summer, winter and all-season products. That strategic move is designed to place Dunlop-branded tyres ahead of competing brands like Firestone, Hankook, and Kleber.

For drivers seeking “affordable and durable tyres”, the company will offer brands such as Fulda, Avon, Debiça, Sava and Cooper.

Executives were explicit that Avon and Fulda will continue to be available across Europe and “keep their significant role in the low-end value segment in the UK and in Germany respectively, where they hold considerable history and recognition in the value tier”.

Debiça and Sava will continue to be available across Europe and keep their key role in the budget segment in the Eastern European countries.

Meanwhile, Cooper Tires will have a long-term focus on 4×4 vehicle fitments, continuing its strong offroad position.

All brands will be available throughout Europe in order to “provide tyre dealers additional options ensuring that partnering with Goodyear offers comprehensive coverage across the premium, value and budget segments.”

The similarities and differences between Elliott’s suggestions and the Goodyear EMEA plans are worth noting. Elliott’s critique highlighted tyre retail rationalisation as a key strategic point. The fact that retail is noticeable by its absence in the EMEA plans demonstrates both the flaws in Elliott’s critique in that specific area and the US-centrism of that overall analysis. What the EMEA plan and the Elliott letter have in common is also what we highlighted as the most pressing point for change in our analysis – the need for brand strategy re-evaluation. Goodyear is doing this by promoting the Goodyear name – in a sense – at the cost of the Dunlop brand. Whether you agree with or even like the chosen approach or not, that particular facet of the EMEA strategy does bring some degree of clarity to the brand basket.