AKRON-Attempting to cut costs in the slow-growing U.S. tire market, Goodyear changed the status of Kelly-Springfield Tire Co. from a wholly owned subsidiary to a division of the company on Jan. 1. Though largely a change in Kelly's legal status, the move paves the way for administrative consolidation that could save Goodyear millions of dollars, the two firms announced Jan. 8.
``As a low-growth, mature tire market, North America has become increasingly price- and value-sensitive in all segments. Producers must respond to that market shift by driving down costs while improving quality and customer service,'' they said.
A timetable for enacting any changes, however, has not been established, a Goodyear spokesman said.
But an industry analyst speculated overlapping administrative functions most likely will be downsized over the next few years.
Goodyear could stand to save around $50 million from the resulting consolidation, according to Harry Millis, an analyst with Fundamental Research Inc., who estimated as many as 500 positions may be eliminated during the next couple of years.
``If properly done, it's simply a cost-effective move without eliminating the customer service functions of either company,'' Mr. Millis said.
It is unclear whether the consolidation would affect any warehousing or distribution centers around the country, or whether the announcement presages plans to move Kelly's Cumberland, Md., headquarters back to Akron, he added.
Those options have not even been considered, the Goodyear spokesman said, adding the company continues to evaluate what changes will be forthcoming. There will be no changes, however, in the sales and marketing functions of either company, which largely serve separate segments of the market.
``Any changes will be transparent to our (dealers),'' he said.
``We're doing business as usual. This doesn't change anything for our customers,'' a Kelly spokesman added.
Goodyear President and CEO Samir F. Gibara cited competitive strain in the global market as the reason for the announcement.
``Operating as we used to when our major competitors were other American companies is a formula for failure in today's global arena,'' Mr. Gibara said.
He added: ``(Goodyear and Kelly) must focus their considerable separate market strengths as efficiently and productively as possible on growth in their respective segments to expand the corporation's leadership in its home market. Unquestioned leadership at home is essential to ultimate success in global markets.''
The announcement of the transition did not affect Goodyear's stock, which finished Jan. 8 unchanged from the day before.
Kelly has operated as a wholly owned subsidiary of Goodyear since 1935.