ORLANDO, Fla. (Feb. 18, 2003) — “Talk is cheap, but...time's expensive.”
To sum up his feelings about the way Goodyear has conducted business with its dealers of late, Goodyear North American Tire President Jon D. Rich, addressing the Goodyear national dealer conference in Orlando, quoted country music muse Mary Chapin Carpenter. And the underlying message was: It's not going to be “business as usual” from now on.
To effect a change in the way Goodyear does business with its dealers, Mr. Rich and his fellow North American Tire executives have crafted a four-point plan of action that they expect will simplify relations with dealers. The objective: allow them to devote the resources necessary to make their own businesses profitable.
Based in part on feedback from dealers the management team has visited the past few months, the plan is designed to help the company halt falling sales and return North American Tire to respectable profitability.
Mr. Rich and three other key executives outlined their plans for 2003 to more than 1,200 independent dealers and their employees gathered at the company's dealer meeting in Orlando Feb. 9-11, which was presented as a baseball theme under the banner: “Dealer All-Stars/A League of Our Own.”
The three-year plan calls for:
* Stabilizing the company through aggressive cost-cutting measures;
* Simplifying the organizational structure;
* Executing a number of efficiency measures, starting with the Six Sigma continuous improvement process; and
* Expanding revenues by adding new points of sale and generating more business through existing customers.
Regarding stability, Mr. Rich pointed out Goodyear has to align capacities with demand better, a goal that will include more than doubling the number of tires the firm imports from its overseas plants, to 10 million units from 4 million last year.
“Our plants, no matter where they are, have to be competitive,” Mr. Rich said. “We either have to fix them or close them.”
Goodyear already has announced job cuts that will reduce North American Tire employment by the end of the first quarter by 1,500, Mr. Rich said, including more than 700 at Goodyear headquarters alone. Additionally, the company faces master contract talks later this spring with the United Steelworkers of America, which represents 13,500 of its North American workers at nine plants.
On simplifying business, Mr. Rich said the company will organize North American Tire along three profit centers—consumer tires, commercial tires, and off-road/aviation/etc. tires—to streamline order processing and improve fill rates. Already, Goodyear has spent $4 million in the past few months on new molds for Dunlop-brand tires and expanded the production of Dunlop tires to five plants from two.
The proposal to simplify order processing is an answer to complaints by many Goodyear dealers, including Colony Tire Co. President Charles Creighton, who told Tire Business: “Goodyear is the toughest tire company to do business with. At times they make it hard to buy tires from them.
“I didn't realize this until I started doing business with other companies and began to see it didn't have to be difficult.”
In his presentation, Mr. Rich took Goodyear to task for its complicated billing procedures, noting that the biggest box on an order form is for complaints and adjustments.
On execution of plans, Mr. Rich said the company anticipates $200 million in annual savings from using Six Sigma business practices. Already the company has re-assigned 100 key employees to implementing Six Sigma and could assign 100 more during the year, Mr. Rich said.
Execution is the key to the plan, Mr. Rich said, noting that, “We are the world's greatest planners, but very mediocre on execution.”
Dealers, too, want to see action, saying they've heard many great plans in the past, only to never see them executed.
Regarding sales growth, Mr. Rich emphasized that Goodyear is committed to “right” pricing its products and bringing stability to its pricing structures.
“We have to eliminate the ‘surge and purge' mentality,” he said, that has grown out of the company's tendency to offer specials at the end of a quarter to prop up sales.
Pricing was at the heart of a running dispute last year between Goodyear and a handful of its largest wholesalers, but Mr. Rich said adjustments to the pricing policies at mid-year resolved many of the issues.
Nonetheless, he ack-nowledged these wholesale distributors still are not buying at volumes they were up to through the end of 2000.
Mr. Rich's four-point plan was supported by a number of other initiatives presented by Jack Winterton, director dealer sales/consumer tires, Michael P. Kitz, vice president marketing and brand management, and Theodore J. Fick, vice president, commercial tire systems.
Mr. Winterton underscored Mr. Rich's four-point program with a list of 10 commitments Goodyear is making to its dealers. He prefaced his remarks by saying, “Many of you today do not believe Goodyear is committed to the independent dealer… It hurts to have you feel this way.”
The commitments are:
* Fair and equitable distribution policies—“We will base distribution decisions on facts and data and are committed to growth in the independent dealer channel.”
* Fair pricing practices and policies—“Price parity is, and can be, misunderstood. We owe you fair pricing, based on volume, services we provide and the cost and values associated with those services.”
* “Right” pricing of all brands benchmarked against the competition;
* Improved fill rates, with an emphasis on Dunlop and Kelly—“We are forming one central supply chain department to handle everything from ‘order to cash.'”
* Improved sales training, including the creation of five “tire academies” across the country that will provide dealer personnel videotaped feedback and an upgraded Web-based “e-learning” program;
* Improved G3 Xpress distributor program;
* Equitable business planning—“We must move from ‘transactional selling' to true business planning,…i.e., replenishing what you sell and not shoving tires down your throat to hit a number.”
* Invest in and build all brands, including the Kelly, Lee, Star, Monarch and Republic brands that are exclusive to the independent channel;
* Increase spending on promotional programs, including doubling the budget for retail sell-out plans; and
* Strengthen the Gemini program through health benefits programs, associate training, business management courses, new point-of-sale materials and cable TV spots in English and Spanish.
Mr. Winterton, a 30-year tire industry veteran—including 25 with Kelly-Springfield—showed he understood the audience.
Two comments he made elicited the biggest reactions from the assembled dealer body that otherwise reacted mostly with respectful but rarely boisterous applause:
“We will call you back”; and “It shouldn't be our job to wake up every day and make your job more difficult.”
Dealers and Goodyear field sales personnel alike agreed that the dealers' response to these two observations underscored just how far astray Goodyear has gone in recent years from acceptable customer relations.