AKRON—Goodyear's 1998 sales in dollars decreased from the previous year and the company's stock price has dropped about 25 percent since June. But, the country's largest tire maker is moving in a positive direction, Chairman Samir Gibara told about 1,000 shareholders at Goodyear's annual meeting April 12.
Mr. Gibara admitted that the company was ``disappointed that some of our results were not as strong as we had expected'' and attributed the shortfalls to economic turmoil in Asia and Latin America and global price pressures.
``Despite these negatives, however, we did deliver respectable financial results,'' Mr. Gibara said.
On the plus side, he said unit tire sales increased 2.3 percent in North America during 1998 and 2 percent worldwide. Also, Goodyear's income from continuing operations grew by 37 percent, and the company added about 2,500 sales outlets in 1998 worldwide.
Mr. Gibara said he is optimistic about the future because Goodyear has continued to invest in new technology, product development and equity investments to increase earnings. The most evident of these actions is the alliance with Sumi-tomo Rubber Industries Ltd. of Japan, announced in February, which is expected to save the companies $300 million to $360 million a year.
Mr. Gibara added that the formal agreement should be signed in May and closed in September once the required approvals are finalized.
He noted how Goodyear has added ``depth'' by acquiring controlling interest in India's South Asia Tyre and Sava Tire in Slovenia, and by assuming full control of Contred in South Africa and Brad Ragan in the U.S.
He also pointed out gains in retail distribution with the addition of 400 stores of Wal-Mart Stores Inc.'s Sam's Club and a long-term deal signed with Penske Auto Centers. ``Goodyear has more than 70,000 locations spanning the globe—all to serve our customers,'' Mr. Gibara said.
The decision to ``rationalize and consolidate'' production operations is intended to place Goodyear's average production cost below all other North American tire makers, according to Mr. Gibara. These steps included: conversion of four tire plants to seven-day operation; new investment in plant operations; product out-sourcing from Latin America; and discontinuing tire manufacturing at the Gadsden, Ala., plant.
The Gadsden decision generated the most controversy at the meeting. As several dozen employees and family members demonstrated outside, several people criticized the company's decision in a question-and-answer session after Mr. Gibara's speech.
The discontinuation of tire manufacturing at the Gadsden plant, which opened in 1929, will eliminate about 1,300 positions. However, about 150 to 200 employees will remain to operate a rubber mixing operation.
Because the plant will not be closed completely, about 500 employees with 25 or more years of service will not receive the full retirement benefits that are stipulated in the contract with the United Steel Workers of America in the event of a total shutdown.
Several veteran employees criticized this decision, which will leave some long-time employees out of work with few severance benefits. Mr. Gibara said the company must remain sensitive to costs, earnings and productivity.
``We don't make these decisions lightly,'' said Mr. Gibara. But, he added, ``we don't want to come close to the situation we had with Mr. Goldsmith.''
In 1986, Goodyear fought off a takeover attempt by British financier Sir James Goldsmith that cost the company $90 million in cash and about $2.5 billion in long-term debt.
``I'm not saying we can guarantee lifetime employment for everybody,'' he said. Goodyear is offering the laid-off workers ``a compensation package that goes well beyond the contractual obligation. We're trying to handle the situation as fairly as we can.''
Another investor was critical of the drop in Goodyear's stock price. Mr. Gibara said Goodyear was part of a ``general disaffection with basic manufacturing stocks.''
He said Asia and Latin America represented about one-third of Goodyear's business and that Asia's economic slump has ``bottomed out.'' Because of the low stock price, Mr. Gibara told the crowd, ``now is the time to buy.''
In his speech, Mr. Gibara said Goodyear spent $1.6 billion on growth, productivity and research and development in 1998. He cited new products and processes like ultra-tensile steel tire reinforcement technology and Extended Mobility Tires.
By the end of 2000, 80 percent of Goodyear's product lines will be less than 3 years old, he said.
He closed by noting the expansion of Goodyear's airship fleet—the company's most identifiable symbol. A new blimp will begin operation in Australia in June, leading up to next year's Summer Olympics in Sydney.
Brad Dawson, Crain News Serviceer, contributed to this story.