AKRON-Goodyear will continue to refine the distribution of its tires to increase sales, Chairman Stanley C. Gault said while unveiling the company's four-year growth strategy June 20th. The plan, which will take the tire maker through its centennial year in 1998, also seeks a 4.5 to 5 percent annual increase in sales, greater productivity and lower operating costs, Mr. Gault said.
``Our task is to take Goodyear into the next century as a stronger company than it is today by building on the success we have enjoyed since 1991,'' he said.
Among its chief goals, Goodyear intends to increase tire sales by focusing on developing and introducing new products, strengthening its position in Asia, India, Indonesia and the former Soviet Union and ``continued refinement of distribution in tune with consumer buying habits.''
A Goodyear spokesman said ``refinement'' means ``doing more work with independent tire dealers to see that they are successful'' as well as continuing to examine where consumers buy their tires.
When asked if Goodyear is considering moving its tires into warehouse clubs, the spokesman said, ``We weren't looking at warehouse clubs, and I believe that is still the case.''
Industry analyst Harry Millis of Fundamental Research Inc. in Cleveland also said he is doubtful Goodyear will be moving into warehouse clubs in the near future-``at least not with the Goodyear or Kelly-Springfield brands.''
Goodyear's performance strategy seeks to increase sales by 4.5 percent to 5 percent annually compared to the tire maker's 2 percent increase last year. That rate, if attained, would about double what the company believes will be the global industry average through 1998.
Also during the next four years, Goodyear plans to:
Push operating margins from 10 percent in 1993 to 12 percent by 1998 with emphasis on manufacturing productivity, global sourcing initiatives, higher value tire lines and strategic pricing;
Lower sales, administrative and general expenses from 16.2 percent of sales in the first quarter of 1994 to below 15 percent of sales by improving productivity and increasing sales;
Maintain capital expenditures between $500 million and $700 million annually compared to the $350 million to $475 million level between 1991 and 1994;
Adopt a new dividend practice of paying 20 to 25 percent of prior-year earnings; and
Drop the ratio of debt to debt-plus-equity to 25-30 percent from 40 percent at the end of the 1994 first quarter. ``At that level, we will have the advantages of a strong financial position as well as the resources to fund future growth,'' Mr. Gault said.
Mr. Millis said Goodyear's goals are ``attainable, but not shoo-ins.'' In particular, he said boosting operating margins to 12 percent by 1998 will pose extreme difficulty, since automotive production is expected to fall off after 1996.
Duff & Phelps Inc. analyst Marvin Behm called Goodyear's goals ``realistic and fundamentally balanced'' but said the company will be challenged during the next four years.
``...(T)hey could do all these things in a vacuum,'' Mr. Behm said, ``but the competition is not going to stand still.''
Announcement of the performance plan comes in the wake of Mr. Gault's May decision to stay on as chairman and CEO through the end of 1995. His contract had been set to expire in December.
The plan, designed to carry the company through the three years immediately following Mr. Gault's planned departure, does not suggest the company already has a successor in mind, according to a Goodyear spokesman.
``(Mr. Gault) will be here for the next year and a half, and the plan will be well under way by that point,'' he said.
Mr. Millis said he believes Goodyear's next CEO may well be Sam Gibara, recently named executive vice president of North American tires.
``(The position) might be his to lose,'' Mr. Millis said. ``Providing that all goals are met over the next year, my guess is he will be the next CEO....But I do think he has to meet expectations.''
Mr. Gault said the company had achieved the three-year performance goals he set in 1991, while meeting its commitment to customers, associates and shareholders.
``As proud as we are of this performance, its real significance lies in the foundation it provides for the company's future,'' he said.
Goodyear's 1994 first quarter results showed continued improvement, with net income surging more than a hundredfold over the 1993 period to $116 million.
Marty Whitford in Akron contributed to this story.