AKRON (June 21, 2006) – Goodyear will reduce its production of private label tires in North America in the coming 12 months by about a third in order to “focus selectively” on more profitable segments of its business.
The decision, which affects up to 10 unnamed private label brands representing about $300 million in annual sales, will result in the reduction of capacity of about 8 million units, Goodyear said. Goodyear makes the private label tires at five plants in North America.
Goodyear said it will work closely with the affected customers to help them find other sources of supply or switch to alternative Goodyear products.
Goodyear did not say what, if any, provisions it would take against earnings to cover the decision, but Jonathan Rich, president of Goodyear's North American Tire business, said the overall business climate – weak industry demand and continued raw materials price increases – likely will result in a drop in operating income this year for the North American business.
“Our intention is to build upon the market strength we have established in our branded and retailer-specific product lines,” Mr. Rich said in a prepared statement.
This change occurs as Goodyear is entering negotiations with the United Steelworkers for a new master contract covering eight tire plants and four engineered products plants.
Investment bank J.P. Morgan Securities Inc. suggested in a note to investors the decision to phase out this private brand business could result in a plant closing. The bank's North American Equity Research unit indicated a plant closing would save the company up to $100 million a year in overhead and labor costs.