AKRON/KOBE, Japan—Goodyear and Sumitomo Rubber Industries Ltd. (SRI) have dissolved their 16-year-old global business alliance, a development both companies view as rife with opportunity to foster growth in the regions where the alliance held sway.
“This successful resolution enhances our flexibility to grow profitably as we focus on delivering strong performance and sustainable economic value,” said Goodyear 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.”
Goodyear originally sought to end the firms' business alliance in late 2014, accusing Sumitomo of engaging in “anticompetitive conduct in violation of applicable antitrust laws.”
Goodyear, which has declined ever since to elaborate on what this conduct comprised, asked the International Chamber of Commerce at that time to arbitrate the dissolution.
This agreement renders the arbitration process moot.
Sumitomo said it expects the dissolution of the alliance to enhance its “management flexibility” in terms of branding strategy and regional business strength. Specifically, it 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.
The alliance ended officially on Oct. 1 in accordance with the terms of an agreeement they signed in April.
In terms of regional operations, SRI said it will be able to strengthen its competitiveness in North America by expanding its motorcycle tire business and its OE car/light tire business with Japanese vehicle makers, while 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.
It now controls one plant—the car, light and medium truck and motorcycle tire factory in Tonawanda, N.Y., originally opened by Dunlop Ltd. in 1923—and a test track in Huntsville, Ala., adjacent to a former Dunlop Tire factory that closed in 2003.
In Europe, SRI said the dissolution will enable it to establish its own manufacturing and R&D bases. The company only recently opened a joint venture 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.
The company expects to disclose “in a timely manner” the impact of the dissolution on its fiscal 2015 results.
Laura Thompson, Goodyear CFO and executive vice president, told financial analysts the firm expects the dissolution to reduce its segment operating income by $10 million to $20 million in fiscal 2016 but increase net income by up to $50 million.
For a list of agreements that were terminated as part of the dissolution, go to www.tirebusiness.com.