Goodyear “pursuing strategic options” to Dunlop, OTR tyres and Chemical business in $2 billion “portfolio optimisation”

The Goodyear Tire & Rubber Company is unveiling its “Goodyear Forward” transformation plan, which – precipitated by the now infamous Elliott letter – is designed to – “optimize its portfolio, deliver significant margin expansion and reduce leverage to drive sustainable and substantial shareholder value creation”. First off, that means generating “gross proceeds in excess of $2 billion” from pursuing a “strategic alternatives for its Chemical business, the Dunlop brand and the Off-the-Road equipment tyre business.” The business will also continue with a new CEO following the parallel announcement of the retirement of current CEO Richard J. Kramer.

In addition, the Goodyear Forward plan includes “cost reduction actions driving an annual, run-rate benefit of $1 billion by the end of 2025”. On that point, the company has initiated cost reduction plans related to “footprint actions and plant optimization; purchasing; SAG; supply chain; and R&D.”

The goal is to double segment operating income margin to 10 per cent by the end of 2025.

In North America Goodyear Forward means optimising “brand and tier positioning, rationalize SKUs”, increasing “customer and channel profitability” and “enhancing coverage in premium product lines”. These “top line actions” are designed to drive an annual, run-rate benefit of $300 million by the end of 2025.

The plan follows a comprehensive evaluation by the Strategic and Operational Review Committee of the Board of Directors to evaluate all strategic, operational and financial opportunities to maximize value.

“Our transformation plan represents a clear path to create a more profitable and focused Goodyear,” said Goodyear chairman, CEO and president Richard J. Kramer. “The Review Committee explored all value maximizing opportunities and identified specific, detailed initiatives to streamline our portfolio, expand margins and fortify our balance sheet, and do so with expediency. Building on our strengths, this plan will enable Goodyear to enhance and expand our leadership position, deliver profitable growth across markets, create significant value for our shareholders and – ultimately – lay the foundation for success for the next 125 years.”

“This plan is the result of a comprehensive, bottom-up assessment of Goodyear’s business, led by the Review Committee,” said Laurette T. Koellner, Independent Lead Director of Goodyear’s Board. “The full Board supports this plan and is confident it will deliver substantial and durable value creation for shareholders. We appreciate the constructive input of our shareholders throughout this process.”

On behalf of Elliott Investment Management, one of Goodyear’s largest investors, Senior Portfolio Manager Marc Steinberg and Portfolio Manager Austin Camporin said: “We believe the ‘Goodyear Forward’ transformation plan represents a significant set of steps toward a stronger and more profitable Goodyear. We thank Rich for his leadership and the Review Committee for its collaborative engagement, and we look forward to continuing our dialogue with the Company as it implements these initiatives and works to deliver the substantial upside value that we see for all Goodyear shareholders.”

The Review Committee consisted of five directors, including two new independent directors appointed in July 2023. Over the course of 16 weeks, the Review Committee engaged in deep analysis and deliberation with assistance from industry-leading financial advisors and consultants.

Evercore, Lazard and Goldman Sachs acted as financial advisors to Goodyear.