AKRON—Goodyear and Sumitomo Rubber Industries Ltd. will exchange replacement tire manufacturing capacity in the U.S. and Japan, according to two agreements signed Feb. 10. Goodyear will manufacture up to 2 million passenger and light truck tires in North America for Sumitomo subsidiary Dunlop Tire Corp. and Sumitomo affiliate Ohtsu Tire & Rubber Co. Ltd., which distributes tires in the U.S. through its Falken Tire Corp. subsidiary.
In Japan, Sumitomo also will make up to 2 million Goodyear tires for sale in that country.
Some industry observers believe the deal, which will run through Dec. 31, 2000, may lead to a ``deeper relationship'' between the tire makers. ``What we have seen here is probably just the first announcement,'' said analyst David Garrity of Smith Barney Harris Upham & Co. Inc.
``Certainly there could be more,'' said Harry Millis of Fundamental Research Inc. The relationship has ``all sorts of potentials to build on,'' including joint venture plants, he said.
``I don't think it could lead to a full-blown merger,'' Mr. Millis added.
Spokesmen for Goodyear and Dunlop would not comment beyond the offtake manufacturing agreement.
``By better utilizing the existing manufacturing assets of both companies, this agreement would avoid creating overcapacity in the industry,'' said Goodyear Chairman Samir F. Gibara. ``It also would reduce the exposure of both companies to future economic cycles in the U.S. and Japan.''
Goodyear expects to begin production of the Dunlop and Ohtsu/Falken tires in May or June, according to Mr. Garrity, but the company's spokesman could not confirm that.
Dunlop already makes tires in the U.S. at its factories in Buffalo, N.Y., and Huntsville, Ala. The offtake manufacturing will not affect those units because Dunlop for some time has imported tires into North America on top of what it makes domestically, a Dunlop spokesman said. The two facilities make Dunlop, Remington and Centennial brand tires, as well as Sumitomo truck tires.
Goodyear also will manufacture Falken's 70-, 75- and 80-series tires along with touring and light truck tires, according to Frank Dorso, Falken president.
``(The agreement) will give us the opportunity to have products in those series to further enhance and support the current and prospective Falken Tire dealers in the U.S.,'' he added.
Ohtsu will continue to make Falken's 55-and lower-series tires in Japan ``because of our high technology development and expertise,'' he said.
``This is something we've been waiting for for a long time. It's excellent for both companies,'' Mr. Dorso said.
Dunlop needs the additional capacity, according to Mr. Millis, especially if it's after possible original equipment business with General Motors Corp.
On the morning the offtake agreement was announced, a story in the Wall Street Journal suggested GM was talking to Dunlop about becoming its fifth OE tire supplier. Spokesmen for GM and Dunlop would not comment on the report but said they are always looking at new auto maker-supplier relationships.
GM increasingly is interested in relationships with new suppliers that can provide the same quality product throughout the world, according to the GM spokesman.
Sumitomo has not said which plants in Japan will make Goodyear tires. Currently, Bridgestone Corp. makes tires for Goodyear in Japan, but that arrangement will be phased out, except for some specialty tires, the Goodyear spokesman said.
Goodyear said it also imports a smaller portion of tires into Japan from its facilities in Indonesia.
A Bridgestone spokesman said Goodyear at the end of 1996 advised the Japanese firm the offtake arrangement in Japan will expire at the end of 1997.
The freed capacity will be used for Bridgestone tires, he said.
Recently, Goodyear has made inroads into Japan's 58 million-unit replacement tire market through distribution agreements with affiliates of Toyota Motor Corp. and Honda Motor Co. Ltd. However, the tire maker's share of the aftermarket is a little less than 3 percent, the company spokesman said. Goodyear said it controls about 2 percent of Japan's overall tire market of 109 million units.
The Sumitomo agreement only covers replacement tires, but Goodyear also sees an opportunity opening up for original equipment tires. ``Clearly the Japanese OE market is fairly substantial,'' the spokesman said.
When asked why Goodyear chose Sumitomo over Bridgestone and Toyo Tire & Rubber Co. Ltd., its partner in a Japanese earthmover tire joint venture, the spokesman said Sumitomo desired more capacity in North America and Goodyear was able to provide it. ``Sumitomo was the best fit as far as we were concerned.''
Goodyear already is ``well represented'' in the Far East, with several tire plants in neighboring countries. But because of restrictions on trade, theese factories were built only large enough to serve their own domestic markets.
Those restrictions have come down in recent years, and Goodyear has responded by adding capacity, but not enough to supply Japan, the spokesman said.
Jen Sisson and Greg Kennedy in Akron contributed to this article.