What OTR Tire Sale Means for Goodyear

The recently announced sale of Goodyear Tire & Rubber Co.’s OTR tire business to Yokohama Rubber Co. Ltd. is the latest step in the Akron, Ohio-based tiremaker’s Goodyear Forward plan.

And the $905 million cash transaction, announced on July 22 and scheduled to close by early-2025, shows that the Goodyear Forward plan is “progressing,” says John Healy, managing director and analyst at Cleveland, Ohio-based Northcoast Research Holdings LLC and MTD’s monthly Your Marketplace columnist. (Click here to read MTD’s full report from July 22.)

In November 2023, Goodyear announced “portfolio optimization” plans to sell its OTR tire business, chemical business and Dunlop brand to generate “gross proceeds in excess of $2 billion.”

At the time, then-Goodyear Chairman, CEO and President Rich Kramer noted that Goodyear’s OTR tire competitors have much larger scale and that ramping up to a similar size would take “significant” investment.

Yokohama, in its announcement of the transaction, said Goodyear’s OTR tire division, which has around 500 employees, achieved total sales of $678 million in 2023.

Goodyear has OTR tire facilities in Topeka, Kan., plus Japan, Kuala Lumpur, Indonesia, South Africa, Brazil and Columbia, according to Goodyear’s corporate website.

A Goodyear spokesperson told MTD that the Topeka plant, which opened in 1945, “will supply tires to Yokohama for an initial period of up to five years, post-closing.”

Goodyear moves forward

Goodyear plans to use proceeds from the OTR tire business sale to “reduce leverage” and “fund initiatives” in connection with Goodyear Forward.

“They’re going to focus on businesses that they can earn an adequate return on and look at businesses that require more capital and they might not be in a position to fund,” Healy told MTD.

“I think it’s a sign that …. they’re progressing with the Goodyear Forward strategy.”

Healy also believes Goodyear is “on-pace” with the expected timeline associated with the OTR tire unit spin-off.

“They laid out early in the year that they had hoped to update the investment community on the sale of at least one of the (three) assets by summer or the middle of the year sometime.

“Additionally, they said they were going to try to get $2 billion for the sale” of the company’s OTR tire and chemical business units and Dunlop brand.

“I think some (within) the investment community were a bit skeptical, but I think the fact they were able to get the first business out and almost get halfway there is a positive.

“To me, they got a good dollar” for the OTR tire business, which Healy believes was probably more difficult to “decouple and move out of the Goodyear organization” than the Dunlop and chemical businesses are.

He also noted that the effort to divest all three business units is a separate initiative than Goodyear’s “cost reduction plan” of $1 billion, which also was announced in late-2023.

Via a presentation posted in November 2023, the Akron, Ohio-based tiremaker said that 40% of the targeted $1 billion savings total will come from “footprint actions and plant optimization,” including increased product standardization “and fewer changeovers,” as well as “enhanced predictive maintenance, labor productivity and ongoing footprint actions,” plus SKU rationalization “to reduce complexity and enable increased plant efficiency.”

Thirty-five percent of savings are expected to come from “reduction in raw materials costs via ‘clean sheet’ approach to identify and negotiate best-in-class prices; vendor (and) spend consolidation; rigorous, data-driven negotiations; and material substitution and consolidation.”

An additional 20% will come from “growth in low-cost/off-shore shared service centers; lean/best-in-class organizational structure for lower cost and increased efficiency; increased automation of transactions via IT/AI; and refined marketing.”

The remaining 5% will be driven by “digital inventory and logistics planning, virtual R&D prototyping and increased efficiency,” as well as the optimization of logistics “to reduce less-than-truckload shipments” and the establishment of “off-shore product development centers.”

On July 22, a Goodyear spokesperson told MTD that the company is “relocating 175 roles supporting our Americas business and corporate functions to a new Goodyear location in Costa Rica, effective in early-2025.”