AKRON — Goodyear has agreed to meet with representatives from a shareholder group that is calling for significant changes in the way the tire maker conducts business, in an effort to "reverse this period of negative performance and set the company on a path to sustainable value creation."
Elliott Investment Management L.P., a West Palm Beach, Fla.-based investment firm that — together with affiliates claims to represent "approximately 10% economic interest" in Goodyear — sent a letter on May 11 to Goodyear CEO, President and Chairman Richard Kramer and its board of directors, detailing the firm's dissatisfaction with what it calls Goodyear's poor stock performance and outlining three major steps it should take.
The suggestions include:
- Appoint five new "highly qualified" individuals to its board to improve governance and spearhead change;
- Divest its corporate retail stores and use the subsequent capital to pay down debt and improve its financial flexibility; and
- Form an operational review committee to develop an operational and development plan.
"We believe that, taken together, these steps will strengthen Goodyear's financial position, bolster its competitiveness globally and create sustainable value, potentially driving Goodyear's stock price to exceed $32 per share (approximately 179% upside from current levels). Moreover, we believe all of these steps are achievable in the near term," the company wrote.
The letter was signed by Marc Steinberg and Austin Camporin, portfolio managers of Elliott Financial, with $55 billion in assets.
It is unclear if and when the two entities will meet to discuss the letter and an accompanying 40-page presentation, which Elliott Investment calls "Accelerating Goodyear."
"It is an unfortunate fact for Goodyear and its investors that over the past decade, owning Goodyear stock has been a disappointment," Elliott Investment wrote. "We believe the company's poor stock performance is a direct result of its significant margin erosion, suboptimal go-to-market strategy and unfocused brand."