AKRON (Jan. 16, 2003)—Goodyear said Jan. 16 it will lay off about 500 salaried employees, 350 of them in Akron and the remainder at other North American locations by March 31.
Another 200 salaried jobs have been eliminated through attrition since the beginning of the fourth quarter of 2002, the firm said. The tire maker also will eliminate another 34 hourly positions at its Akron Technical Center, for a total reduction of 734 salaried and hourly workers. About half the layoffs are in the company's North American Tire operation, with the remainder coming from its corporate function and support groups.
The cuts are expected to result in savings of about $80 million annually, according to Goodyear, and the company will take a pre-tax charge of about $75 million against first-quarter earnings.
An early January memo to Goodyear employees from new CEO Robert J. Keegan—in which he stressed substantial cost cuts were needed for the company to remain competitive—set the stage for the latest round of layoffs for the Akron-based company.
The tire maker said it was trimming its global work force of 95,000 because it needs to improve its cost structure. Mr. Keegan said in his memo to employees the company would review all options to hit that goal, “including low-cost product sourcing, manufacturing rationalizations and staff reductions.”
In its Jan. 16 announcement, Mr. Keegan called 2003 a year of change and transformation for Goodyear.
Analysts who follow Goodyear closely are hoping that's true. Most said they were not surprised by Goodyear's move, principally because it's what the firm usually does when it's facing financial difficulties, two said. But, they maintained, the firm needs to do more.
Goodyear officials will have an opportunity to discuss how they plan to turn the company's dwindling fortunes around when they meet with analysts in New York in February. And, a spokesman admitted, “we have a history of announcing restructuring activities” at that time.
The tire maker has been reeling under an assortment of problems during the last several months, including a loss in market share, tumbling stock prices and a drop in earnings.
The firm closed its 33-year-old mold facility in Stow, Ohio, in October, eliminating more than 150 jobs. And two rounds of layoffs at its plant in Union City, Tenn., along with a phase-out of hose operations at its Lincoln, Neb., site eventually will leave about 1,400 employees without jobs.
“Goodyear needs to improve its cost structure, and it needs to restructure,” said Efraim Levy, an analyst with New York-based Standard & Poor's Equity Group. “But if Firestone can start bouncing back, so can Goodyear.”
In addition, he said, the company “must sell more tires, and it needs different marketing strategies. People remain skeptical (of Goodyear) because its five-year plan (launched in 1998) was to grow as fast as the market, which would put it at $20 (billion)-$23 billion in revenues in 2003. That hasn't happened.”
David Bradley of J.P. Morgan Securities Inc. in New York said he's not convinced that job cuts and plant closings alone will resolve Goodyear's woes. It was inevitable that the company would initiate a cost-cutting plan, he said, “because its earnings were scraping the bottom of the barrel.”
But Goodyear must do something more significant, the analyst said. The tire maker “has done a lot of downsizing over the years, but that hasn't proved to be enough.” He suggested a far more creative plan is needed to help alleviate investors' concerns about the firm.
UBS Warburg L.L.C.'s Saul Rubin said the personnel cuts are a good start. The firm needs to improve efficiency, lower costs and reduce staffing, according to the analyst.
“They should be using what they have,” including the company's lower-cost manufacturing in Brazil, he said. “Of course, if you move sourcing offshore, then that means personnel cuts here at home. The big question is: Can management pull it off?”
Goodyear's latest cuts were made following a week of rumors spurred by Mr. Keegan's memo that the layoffs would likely be forthcoming. However, the Goodyear spokesman claimed the reports were pure speculation.
The tire maker had a net loss of $600,000 for the first nine months of 2002, an improvement from a loss of $29.6 million the previous year. Most analysts expect year-end earnings to be slightly above or at the break-even point for 2002.
Tire Business Staff Reporter Bruce Davis contributed to this report.