Published on February 13, 2014

Goodyear seeking to dissolve SRI alliance

AKRON (Feb. 13, 2014) — Goodyear is seeking to dissolve its 15-year-old global business alliance with Sumitomo Rubber Industries Ltd. (SRI) and has asked the International Chamber of Commerce (ICC) to arbitrate the dissolution.

Laura Thompson, Goodyear's executive vice president and CFO, said the Akron-based tire maker approached the ICC Jan. 10 seeking arbitration of the action after determining SRI had engaged in "anticompetitive conduct in violation of applicable antitrust laws.

"We have concluded that [action] warrants the dissolution of this global alliance."

 

She did not elaborate during a conference call today on the circumstances, but such conduct is one of the "exit rights" outlined in Goodyear's financial statements.

Goodyear's action came to light this week after SRI released a statement related to inquiries from the ICC. Sumitomo President Ikuji Ikeda also commented on the matter at a press conference, according to Japanese news reports.

Goodyear photo
Laura Thompson, Goodyear executive vice president and CFO

Ms. Thompson said Goodyear does not believe the dissolution "will have any material adverse impact on our customers, our operations or our liquidity."

The firms' alliance dates to 1999, when Goodyear acquired 75-percent of SRI's manufacturing and sales assets in Europe and North America, which operate as Goodyear Dunlop Tires Europe B.V. (GDTE) and Goodyear Dunlop Tires North America Ltd. (GDTNA). The deal includes rights to the Dunlop brand in these markets.

The firms also operate joint ventures in Japan — 75-percent owned by SRI — covering sales of the Goodyear and Dunlop brands to the Japanese OE and replacement markets, and other ventures covering technology and materials procurement.

According to Goodyear financial filings:

• "SRI has the right to require us to purchase its ownership interests in GDTE and GDTNA, which we refer to as 'exit rights,' if there is a change in control of Goodyear, a bankruptcy of Goodyear or a breach, subject to notice and the opportunity to cure, of the global alliance agreements by Goodyear that has a material adverse effect on the rights of SRI or its affiliates under the global alliance agreements, taken as a whole."

In addition, the company said, "SRI has exit rights upon the occurrence of the following events:

• "The adoption or material revision of a business plan for GDTE or GDTNA if SRI disagrees with the adoption or revision;

• "Certain acquisitions, investments or dispositions exceeding 10 percent but less than 20 percent of the fair market value of GDTE or GDTNA or the acquisition by GDTE or GDTNA of all or a material portion of another tire manufacturer or tire distributor;

• "If SRI decides not to subscribe to its pro rata share of any permitted new issue of non-voting equity capital authorized pursuant to the provisions of the shareholders agreements relating to GDTE or GDTNA;

• "If GDTE, GDTNA or Goodyear takes an action which, in the reasonable opinion of SRI, has—or is likely to have—a continuing material adverse effect on the tire business relating to the Dunlop brand; or

• "If at any time SRI's ownership of the shares of GDTE or GDTNA is less than 10 percent of the equity capital of that joint venture company.

"SRI must give written notice to Goodyear of its intention to exercise its exit rights no later than three months from the date such exit rights became exercisable, except that notice of SRI's intention to exercise its exit rights upon the occurrence of the event described in the last bullet point above may be given as long as SRI's share ownership is less than 10 percent.

"If SRI were to exercise any of its exit rights, the global alliance agreements provide that the purchase price would be based on the fair value of SRI's minority shareholder's interest in GDTE and GDTNA. The purchase price would be determined through a negotiation process where, if no mutually agreed purchase price was determined, a binding arbitration process would determine the purchase price.

"Goodyear would retain the rights to the Dunlop brand in Europe and North America following any such purchase."

Paris-based ICC is a global business organization that provides a forum for businesses and other organizations to examine and comprehend the nature and significance of shifts taking place in the world economy. The ICC also offers commercial arbitration service in matters relating to entities doing business across frontiers.

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To reach this reporter: bdavis@crain.com; 330-865-6145

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