AKRON (Oct. 1, 2015) — Goodyear and Sumitomo Rubber Industries Ltd. (SRI) have dissolved their 16-year-old global business alliance, effective Oct. 1 in accordance with the terms of their previously disclosed agreement.
“This successful resolution enhances our flexibility to grow profitably as we focus on delivering strong performance and sustainable economic value,” said CEO, Chairman and President Richard Kramer.
“Despite current challenges in the global economy, the long-term growth prospects for the tire industry remain strong. This agreement paves the way for us to pursue our growth strategy and strengthen our presence in key global markets particularly where our technology leadership and the Goodyear brand provide us competitive advantage.”
The completion of the transaction will resolve the pending arbitration filed in January 2014, Goodyear said.
Separately, Kobe, Japan-based Sumitomo Rubber said it expects the dissolution of its 16-year-old global business alliance with Goodyear to enhance its “management flexibility” in terms of branding strategy and regional business strength.
Sumitomo said it will be able to “further strengthen its global operations” by using both the Dunlop brand, recognized as a premium brand with high fuel efficiency, and the Falken brand, which is well known for its motorsports heritage mainly in Europe and North America.
In terms of regional operations, SRI said it will be able to strengthen its competitiveness in North America by expanding its OE tire business with Japanese vehicle makers and its motorcycle tire business.
As a result of the dissolution, following agreements have been terminated, effective as of Oct. 1:
- Umbrella agreement, dated June 14, 1999, between the Company and SRI, as amended from time to time;
- Joint venture agreement for Europe, dated June 14, 1999, among Goodyear, certain Goodyear subsidiaries, SRI and certain subsidiaries of SRI, as amended from time to time; and
- Shareholders agreement for the Europe joint venture, dated June 14, 1999, among Goodyear, certain Goodyear subsidiaries and SRI, as amended from time to time.
- Goodyear retains exclusive rights to sell Dunlop-brand tires in the replacement market and to non-Japanese auto manufacturers in the U.S., Canada and Mexico, as well as exclusive rights to sell Dunlop-brand tires in replacement and original equipment markets in European countries where the former joint venture exclusively served the market;
- Goodyear regains exclusive rights to serve Japanese markets with Goodyear-brand tires;
- Goodyear acquired from SRI its 25-percent interest in Goodyear Dunlop Tires Europe B.V.:
- SRI acquired Goodyear's 75-percent interest in Goodyear Dunlop Tires North America, with the caveat that Goodyear maintains control of Dunlop-related trademarks for tire-related businesses in North America while granting to SRI an exclusive license to develop, manufacture and sell Dunlop tires for motorcycles and for Japanese-owned vehicle manufacturers in North America;
- SRI acquired Goodyear's 25-percent interest in Dunlop Goodyear Tires Ltd., a Japanese venture;
- Goodyear acquired from SRI its 75-percent interest in Nippon Goodyear Tire Ltd., a Japanese venture;
- Goodyear sold to SRI the Huntsville, Ala., test track used by Goodyear Dunlop Tires North America.
- SRI obtained exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa;
- Goodyear paid SRI $271 million; and
- Goodyear delivered to Goodyear Tires North America a promissory note with an initial principal amount of $56 million and a maturity date three years following the date of dissolution at an interest rate of LIBOR plus 0.1 percent.
Following the dissolution, the parties agreed to:
- Liquidate and dissolve their Technology and Purchasing joint ventures and to distribute the remaining assets and liabilities of these ventures to Goodyear and SRI in accordance with their respective ownership interests; and
- Conduct an orderly sale of the common stock held by the companies in each other.
In its statement, SRI said having its own manufacturing and research and development in the region will enable it to “further strengthen its competitiveness” and support growth in the region.
In Europe, Sumitomo said the dissolution will enable it to establish its own manufacturing and R&D bases. The company only recently opened a plant in Turkey that could be used to supply Europe.
SRI said because of the growth opportunities offered by this change, it now aims to surpass its earlier disclosed financial goals of $10 billion in sales and an operating ratio of 12. 5 percent by 2020.
SRI expects to disclose “in a timely manner” the impact of the dissolution on its fiscal 2015.