Goodyear announces growth strategy, investment plans

Goodyear announces growth strategy, investment plans

Posted: Thursday, June 26, 2008 9:53 pm

The Goodyear Tire & Rubber Company was to discuss its strategy to capitalize on worldwide growth in demand for its innovative high-value-added tires, further develop its strong emerging market businesses, enhance its global supply chain and increase its cost reduction efforts. The plans were announced during an investor conference in New York today. “Given the challenges that the macro-environment is presenting, particularly in North America, we are performing well in a difficult environment. We respect the magnitude of the market challenges we face,” said chairman and chief executive officer Robert J. Keegan. “Our business model changes over the past five years have positioned us to manage through the current environment while continuing to drive our long-term strategies.” The company’s strategy to drive profitable growth includes significant plans to capitalize on worldwide increases in demand for its innovative, high-value-added tires. Goodyear will leverage its innovation capabilities to differentiate its products in the marketplace, Keegan said. The company also plans to build on strength in its profitable businesses in the emerging markets of Latin America, Eastern Europe and Asia. “Growth in markets such as China, Russia and Brazil and a transition to increasingly high-value-added tires in these markets represent significant opportunities,” Keegan said. “Our leadership teams in these markets have proven capability to develop markets, build strong distribution networks, leverage our brands and deliver high returns. We see many opportunities for our businesses in emerging markets to continue to be a major growth engine for Goodyear.” Goodyear leaders were to discuss the impact of higher fuel prices, changing driving habits and a shift in vehicle preferences in the United States. Structural cost topics to be discussed in the meeting included: • Goodyear’s decision to in-crease its cost savings target to more than $2 billion by 2009 from its prior goal of between $1.8 billion and $2 billion through intensified focus on efficiency throughout the supply chain and in back office operations. • The announced closure of Goodyear’s tire manufacturing plant in Somerton, Australia, which completes the company’s targeted reduction of about 25 million units of high-cost capacity as part of its 4-point cost savings plan. High-return growth opportunities to be discussed included: • Investment of up to $500 million to increase Goodyear’s presence in China through a relocation and expansion of its manufacturing plant in Dalian to facilitate increased production of high-value-added consumer and commercial tires for the Asia-Pacific region. • Investments of $500 million to $700 million over five years to modernize four U.S. manufacturing plants to increase high-value-added tire production and improve cost efficiency. • Investments of up to $600 million to expand production in Brazil and Chile. • Investments of about $500 million to modernize and expand production in Germany and Poland. “Going forward, we anticipate capital investments totaling between $1 billion and $1.3 billion per year from 2008 to 2010,” Keegan said. “Our plans, however, are flexible so that we can adjust both the pace and amount to reflect the macro-environment and market trends while maintaining positive cash flow. We will continue to be extremely analytic and hard-nosed with respect to the allocation of capital and are focused on return on invested capital as a key financial metric,” he added. The company expects to increase high-value-added capacity by 50 percent from 2006 levels and to increase its low-cost capacity to 50 percent of its worldwide total by 2012. Published in The Messenger 6.26.08

Leave a Comment