KOBE, Japan — Regaining control of the Dunlop brand in North America and Europe is part of Sumitomo Rubber Industries Ltd.'s strategy to re-establish Dunlop as a "premium tire brand in the global market," the Kobe-based company said recently.
"By leveraging our rich heritage and strong brand recognition, we will set ourselves apart from competitors through innovative products that integrate cutting-edge technologies in addition to meeting the evolving needs of the next-generation mobility society."
SRI, which already controls the Dunlop brand in most other regions across the globe, agreed this week to buy the North American and European rights to the venerable Dunlop tire brand from Goodyear — which has controlled those rights since 1999 — for $701 million.
The deal, signed 14 months after Goodyear disclosed plans to divest the Dunlop brand rights, includes trademarks and "intangible assets necessary for operations" of the Dunlop business in Europe, North America and certain markets in Oceania for consumer, commercial and other specialty tires.
Goodyear gained control of the Dunlop brand in North America and Europe in 1999 as part of a global alliance with SRI, and retained those rights in 2015 when the companies dissolved their alliance.
SRI agreed to pay Goodyear $526 million for the Dunlop brand and certain associated intellectual property and another $105 million in a transition fee for support "in transitioning the brand and associated intellectual property, and facilitating the transition of Dunlop customers, to SRI, including planning matters and support of distribution and logistics."
In addition, SRI will purchase existing Dunlop consumer tire products "at an agreed markup." Goodyear said the exact inventory value to be sold will be finalized between signing and closing, but the company said it estimates proceeds to be $70 million.
Goodyear estimates the value of Dunlop-brand products it sells at more than $750 million annually.
Under terms of a transition off-take agreement (TOA), Goodyear will supply certain Dunlop-branded tires to SRI in Europe for five years. The agreement stipulates minimum purchase quantities of 4.5 million tires per year for the term, on a take-or-pay basis.
SRI — which has developed the Falken brand over the past quarter century as its primary brand in Europe and North America — said it intends to position Dunlop as its "core brand" and advance its "brand-strengthening activities as a joint effort between our tire and sports businesses.
"By accelerating brand investment in motorsports and global marketing activities in tennis, we will increase the value of the Dunlop brand around the world and develop it into the brand of choice for customers."
SRI President and CEO Satoru Yamamoto noted: "Going forward, we will maximize the potential of the Dunlop brand, not only in the new regions where we have acquired rights, but also in existing regions, and further accelerate our efforts to realize our purpose: 'Through innovation we will create a future of joy and well-being for all.'"
At the same time, SRI said it intends to continue developing the Falken brand "by utilizing the product planning and marketing capabilities we have cultivated in each region to focus on bold, one-of-a-kind products that appeal to its core fan base.
"Through a dual-brand approach to business development, we aim to increase sales volume in each region and raise the proportion of premium products."
Signing this deal comes two months after SRI closed its only North American tire factory, the 102-year-old facility in Tonawanda, N.Y.
SRI executives since then have reiterated the company's belief, however, that it needs captive manufacturing capacity in North America.
Under the terms of a Transition License Agreement (TLA), Goodyear will continue to manufacture, sell and distribute Dunlop consumer tires in Europe through at least Dec. 31, 2025, with the Akron-based tire maker paying a royalty to SRI during this period on Dunlop sales. Goodyear will retain all profits from those sales.
This agreement will extend through Dec. 31, 2026, unless Goodyear and SRI agree to an earlier termination.
Goodyear said the transition period was intended to provide SRI more time to scale its organization in Europe in order to absorb the Dunlop brand and maintain service for existing Dunlop customers.
Goodyear said it will license back the Dunlop trademarks from SRI for commercial (truck) tires in Europe on a long-term basis, subject to a royalty on sales. Goodyear can terminate this agreement at any time during the licensing period.
Goodyear also will retain Dunlop trademark rights for four-wheel tires in India, Malaysia, Singapore and Brunei; and for motorcycle tires in India, Europe and Oceania, according to SRI.
Earlier last year, Goodyear repositioned the Dunlop brand as its "pan-european" value brand, positioned between the premium Goodyear and five "local hero brands," what Stewart called the upper part of Tier 2. In North America the brand has shrunk to under a 1% market share.
Goodyear does not expect the transaction "to materially impact segment operating income through the term of the TOA."
After that, Goodyear expects to reduce segment operating income by approximately $65 million per year during the term of the TOA, before any other actions it may take to improve operating margin. SRI may end the TOA after the third year, with 12 months' notice, subject to termination fee. The TOA provides Goodyear with an agreed markup to total costs (including raw materials) for each tire sold.
