Goodyear's board of directors has awarded Chairman and CEO Robert J. Keegan with a $2.6 million bonus for 2004, a larger bonus than either Samir Gibara or Stan Gault ever earned when they were chairmen of the Akron tire maker.
Mr. Keegan also earned a salary of $1.05 million in 2004. In 2003 he earned a salary of $1 million and a bonus of $509,200.
Jon Rich, president of the North American Tire unit, earned a 2004 salary of $420,000.
The board approved on Feb. 22 Mr. Keegan's bonus and a $680,000 bonus to Mr. Rich, according to company filings with the Securities and Exchange Commission (SEC). The filings said the bonuses were based on the achievement of specific financial targets set a year ago, as well as EBIT (earnings before interest and tax) and operating cash flow goals. The board's compensation committee approved funding for the 2004 payment pool at about 189 percent of the target amount set for bonuses.
The compensation awards reflect the strides Goodyear has made since a few years ago when the company's balance sheets were bleeding red and some were forecasting bankruptcy in the company's future.
``The compensation that we put in the filing is consistent with the progress that has been made in Goodyear's turnaround efforts,'' a company spokesman said. ``While we haven't closed our 2004 books and finalized the results yet, 2004 was clearly a year that we exceeded the expectations of many in terms of our performance and progress toward the financial turnaround.''
Mr. Keegan is credited with engineering Goodyear's turnaround through cost-cutting measures, layoffs, plant closings, restructuring loans and successful bargaining with union workers. Under his leadership, the tire maker restored previously strained relations with its dealers and launched new products in 2004 that helped it gain market share in North America.
Goodyear has not released its official results, but it has said it will finish 2004 in the black for the first full year since 2001 and that operating earnings in North America had more than doubled. For the first nine months of 2004, Goodyear reduced its loss to $12.3 million from a loss of $372.3 million in 2003. Sales surged 20.5 percent to $13.5 billion.
The board also established Mr. Keegan's 2005 salary at $1.1 million, effective May 1. Target executive bonuses for 2005 are $1.5 million for Mr. Keegan and $385,000 for Mr. Rich, according to the SEC filings.
By comparison, the largest bonus Mr. Gibara ever earned in his six-year term as chairman was $961,875 paid out in 1997. He earned no bonus in 2002, the year Goodyear posted a $1.1 billion loss. Mr. Gault, who is credited with bringing Goodyear to financial stability after the 1986 failed takeover bid by Sir James Goldsmith-as well as engineering its plunge into distribution through mass merchandisers including Sears, Roebuck and Co.-received a $1.16 million bonus in 1994, his largest amount.
The Goodyear spokesman declined to comment on whether the bonus puts Mr. Keegan as one of the highest-paid CEOs in Goodyear's history.
Goodyear's bonus award to Mr. Keegan is far below what CEOs of many Fortune 500 companies earn, but it is four times higher than the bonus Thomas Dattilo, chairman of rival Cooper Tire & Rubber Co. in Findlay, Ohio, made in 2002. Mr. Dattilo earned a bonus of $535,898 that year and no bonuses in 2003 or 2001, though Cooper did give him a 2003 payout of $413,465 in a stock-unit award.
Maurice Taylor Jr., president and CEO of Titan International Inc., earned no bonus in 2003 or 2002 after receiving a bonus equal to his salary of $400,000 in 2001. At press time, Cooper and Titan had not yet filed 2004 proxy statements with the SEC.
Analyst Saul Ludwig of McDonald Investments Inc. declined to comment specifically on Mr. Keegan's bonus but said his leadership is driving Goodyear's turnaround.
``I think that Goodyear made a lot of progress in terms of the turnaround and that Keegan showed that he is doing some positive things that are beginning to take hold,'' Mr. Ludwig said. ``He's got a long way to go, but I think they're out of the box anyway in terms of starting to deliver some performance.''