What OTR Tire Sales Mean for Goodyear

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

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

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, Rich Kramer, then chairman, CEO and president of Goodyear, noted that Goodyear’s OTR tire competitors have much larger scale and that scaling to a similar size would require a “significant” investment.

Yokohama said in the transaction announcement that Goodyear’s OTR tire business, which employs approximately 500 people, will generate total revenues of $678 million in 2023.

According to Goodyear’s corporate website, Goodyear has OTR tire manufacturing plants in Topeka, Kansas, plus Japan, Kuala Lumpur, Indonesia, South Africa, Brazil and Colombia.

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

Goodyear moves forward

Goodyear plans to use the proceeds from the sale of the OTR tire business to “deleverage” and “fund initiatives” related to Goodyear Forward.

“They’re going to focus on companies where they can get an adequate return and look at companies that need more capital that they may not be able to finance,” Healy told MTD.

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

Healy also believes Goodyear is “on track” with the expected timeline associated with the spin-off of the OTR tire division.

“They indicated early in the year that they hoped to notify the investment community of the sale of at least one of the (three) assets by the summer or sometime mid-year.

“In addition, they said they would try to get $2 billion from the sale” of the company’s OTR tire and chemical business units and the Dunlop brand.

“I think some (within) the investment community were a little skeptical, but I think the fact that they were able to launch the first venture and be almost halfway there is positive.

“I think they got a good dollar” for the OTR tire business, which Healy thinks was probably harder “to extricate and move out of the Goodyear organization” than the Dunlop and chemical businesses.

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

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

Thirty-five percent of the savings are expected to come from “reducing raw material costs through a ‘clean slate’ approach to identifying and negotiating best-in-class prices; consolidating suppliers and spend; rigorous, data-driven negotiations; and substitution and consolidation of materials.”

Another 20% will come from “growth in low-cost/off-shore shared service centers; a lean/best-in-class organizational structure for lower costs and increased efficiency; increased transaction automation via IT/AI; and sophisticated 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 positions supporting our U.S. business and corporate functions to a new Goodyear location in Costa Rica, effective in early 2025.”