Goodyear plans to cut 5,000 employees from its work force globally and reduce its cost structure by another $700 million by year-end as it copes with volatile global economic conditions.
That was part of the message President and CEO Robert Keegan passed along April 7 to those attending the company's annual shareholder meeting.
He identified three areas that will keep Goodyear healthy and on a path to success:
* “Top line—encompassing new product leadership, building our core brand strength and leveraging our industry leading distribution network”;
* Trimming costs by aligning the firm's cost structure with lower industry volumes; and
* Managing for cash by focusing on the strength of the company's balance sheet and generating funds to reinvest in the business.
The tire maker has raised its four-point cost savings plan to $2.5 billion, Mr. Keegan said. It has trimmed $1.8 billion from its cost structure since the plan was put in place in 2005.
Mr. Keegan said Goodyear will meet its target by cutting its work force by another 5,000 employees, bringing the total since the beginning of 2008 to 9,000; implementing a global freeze on salaries; lowering its manufacturing costs through shortened work weeks, fewer manufacturing personnel and reduced third-party sourcing; increasing its lean manufacturing and Six Sigma processes; eliminating non-essential spending; and continuing to close underperforming retail stores.
To date, the company has cut more than 5 percent of its work force, or almost 4,000, he said.
In addition, Mr. Keegan said, “we are aligning our manufacturing capacity with lower industry demand. We plan to reduce capacity by an additional 15 million to 25 million units over the next two years.”
He also noted that Goodyear will continue to be aggressive as it focuses on managing for cash in 2009. “We are implementing targeted inventory reductions made possible by significant improvements in our supply chain,” he told shareholders. “We anticipate these reductions will reach more than $500 million, or approximately 14 percent of inventory.
“We also are adjusting our capital expenditure plan and now expect spending of between $700 million and $800 million in 2009.”
Throughout the year, he said, Goodyear will continue to pursue the sale of non-core assets.
“As in 2008, we are preparing contingency actions beyond these initiatives,” Mr. Keegan said. “We are fully prepared to implement additional actions if market conditions further deteriorate.”
He noted that despite the economic challenges of 2009, new products, strong dealer support and innovative marketing programs will be “the core revenue-generating strengths of the company” as it moves forward.