NEW YORK (June 26, 2008) — Goodyear will close its tire plant in Somerton, Australia, relocate its plant in Dalian, China, and invest $1.6 billion to $1.8 billion in plants in the U.S., Latin America and Europe over several years to improve its global competitiveness.
Closing the 47-year-old Somerton passenger and light truck tire plant completes the firm's targeted reduction from two years ago of about 25 million units of capacity in high-cost plants, the Akron-based tire maker said, and will mark the end of Goodyear's presence in Australia as a manufacturer. The closing will affect 600 employees there.
Goodyear said it will present more details today at an investor conference in New York.
In China, Goodyear intends to spend up to $500 million to increase its presence there by expanding its capacity at a new facility in Dalian.
In the U.S., Goodyear said it is budgeting $500 million to $700 million over five years to modernize four U.S. tire plants to increase production of higher value-added tires and improve cost efficiency. A spokesman said the four plants are Gadsden, Ala.; Fayetteville, N.C.; Topeka, Kan.; and Danville, Va.
In Latin America, Goodyear is planning investments of up to $600 million to expand production in Brazil and Chile.
In Europe, the firm is budgeting approximately $500 million to modernize and expand production in plants in Germany and Poland.
The production adjustments and investments should help the firm increase its high-value-added capacity by 50 percent from 2006 and raise its low-cost capacity to 50 percent of its worldwide total by 2012.
“Going forward, we anticipate capital investments totaling between $1 billion and $1.3 billion per year from 2008 to 2010,” Chairman and CEO Robert Keegan said in a prepared statement. Spending at that level would represent an increase of 40 to 85 percent over the firm's capital expenditures of the past few years.
“Our plans, however, are flexible so that we can adjust both the pace and amount to reflect the macro-environment and market trends while maintaining positive cash flow,” Mr. Keegan said. “We will continue to be extremely analytic and hard-nosed with respect to the allocation of capital and are focused on return on invested capital as a key financial metric.”
Part of the firm's strategy includes builing its profitable businesses in the emerging markets of Latin America, Eastern Europe and Asia.
“Growth in markets such as China, Russia and Brazil and a transition to increasingly high-value-added tires in these markets represent significant opportunities,” Mr. Keegan said.