Goodyear: Net impact of SRI breakup positive

AKRON (June 5, 2015) — Goodyear expects the dissolution of its global business alliance with Sumitomo Rubber Industries Ltd. (SRI) to reduce its segment operating income by $10 million to $20 million in fiscal 2016 but increase net income by up to $50 million, Goodyear Executive Vice President and CFO Laura Thompson told financial analysts this morning.

The Akron-based tire maker expects the deal to be finalized by the fourth quarter, Ms. Thompson said, so any impact on the firm's finances wouldn't be seen until next year.

She said the positive impact on the bottom line will come primarily from not having to pay dividends in Europe to minority interest partner SRI.

The net effect of the dissolution would be an increase in unit sales volume of about 2 million to 3 million units, Ms. Thompson said, based largely on the anticipated increase in business with the Goodyear brand in Japan, where Goodyear will control the destiny of its brand for the first time in 16 years.

While unit sales would be up, Goodyear estimates the net effect on sales revenue would be a drop of $100 million to $160 million — with the biggest drop coming in North America, where SRI will be assuming control of the Dunlop-brand motorcycle tire business.

(Goodyear photos)

<center>Laura Thompson</center>

Ms. Thompson also said Goodyear and SRI have agreed to “long-term offtake” supply agreements in order to ensure a “smooth and orderly” transition. The company did not provide details of these agreements.

In general, she said the deal will reduce complexities and improve efficiencies in Goodyear's day-to-day operations and provides the company “increased flexibility to grow profitably.”

Separately, the United Steelworkers (USW) union issued a statement regarding the pending transfer of ownership of Goodyear's Tonawanda, N.Y., plant to SRI.

“The USW has a voice in this transaction on behalf of our members and we welcome any employer who recognizes our collective bargaining agreement and its obligations,” the union said.

“In addition, we welcome any employer who intends to strengthen and grow the business at the Buffalo plant by investing the necessary capital to accomplish those goals and establish the facility as a premier tire producing factory in the United States. We look forward to fruitful discussions with Sumitomo and a bright future for the factory.”

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