MELBOURNE, Australia (Aug. 17, 2001)—Pacific Dunlop Ltd. and Goodyear have struck a deal that effectively will allow the Australian company to sell its 50-percent stake in their financially struggling South Pacific Tyres Ltd. joint venture to Goodyear four to five years hence.
A non-binding memorandum of understanding between the companies—still subject to approval by Goodyear's board of directors—limits Pacific Dunlop's investment exposure in South Pacific Tyres and calls for significant changes in the venture's manufacturing operations to bring it back into the black, the companies said, without divulging specifics.
In the past year, South Pacific Tyres has phased out medium truck tire production at its Somerton plant and trimmed employment by 500 jobs. For the year ended June 30, South Pacific Tyres suffered a $16 million pre-tax loss on lower sales—a 15-fold increase over the fiscal 2000 loss.
The memorandum would give Pacific Dunlop an option to sell its share in South Pacific Tyre to Goodyear at predetermined conditions during a 12-month period in 2005-2006; should Pacific Dunlop not exercise its option, Goodyear would then have a six-month option period to buy the share.
Pacific Dunlop blames rising imports from low-cost Asian competitors for market share declines, and lower volumes, falling selling prices and operating inefficiencies for the losses. South Pacific produces and sells tires under the Goodyear, Dunlop and Olympic names. It exports certain ranges of Dunlop tires to the U.S.