Analysts weigh in
Two stock analysts don't foresee Goodyear looking to make manufacturing cuts after the deal closes.
"It seems more like a distribution synergy," Bret Jordan, an analyst with Jefferies L.L.C., said.
He said there could be some benefits down the line by transferring production among facilities with capacity.
Cooper has a strength in SUV and light truck tires as well as a history of making private-label tires, so Goodyear ultimately could see value in putting some molds in Cooper facilities to make both brands, Mr. Jordan speculated. The bottom line, however, he said, is that he doesn't know.
"It's possible that Goodyear could move some volume to lower-cost facilities that Cooper's got in their portfolio. So I wouldn't be surprised if things move around," Mr. Jordan said. "I clearly don't have any visibility as to whether that's part of their initial strategy or not. I would image the first thing they are going to do is try to get some supply chain synergy, corporate synergy.
"And if they can move production around to markets where they can get lower costs for some of their lower-end lines like out of the Eastern European business or move things around to where there's incremental capacity in North America," he said.
Stock analyst James Picariello of Keybanc Capital Markets L.L.C. also doubts Goodyear will cut production.
"This is a scenario where Cooper and Goodyear are going to have to produce as much as they possibly can for two years because there are supply shocks and because the tariffs are so onerous that anything Cooper and Goodyear can produce, they sell. That's a bold-case, blue-sky scenario. But that's possible," he said.
"I don't think that now would be the time or even a year from now would be the time to explore any plant closures. I don't think that's part of the deal," Mr. Picariello said. "Otherwise they would have put it in (the announcement)."
Mr. Kramer said many of the advantages the combined entity would realize in manufacturing, distribution and innovation will come in the U.S. and China, the two largest tire markets in the world, accounting for about one-third of industry value.
Goodyear currently has one tire factory in China, with capacity to make 12 million units a year of passenger, light truck and truck/bus tires. Cooper, meanwhile, has one wholly owned and one JV factory in China, giving Goodyear a boost in capacity and exposure.
"In China, we will essentially double our presence in the consumer OE channel," Mr. Kramer said. "Unlike the U.S., the consumer OEM and replacement segments are similar in size in China due to the infancy of the country's car parc.
"Expanding our presence with OEMs, especially local auto makers, will give us additional opportunities to create pull-through demand in replacement markets, which is projected to grow quickly in the years ahead as the car parc matures."
Overall, the Goodyear chairman said the addition of Cooper's manufacturing assets, coupled with Goodyear's technology and distribution leadership, provide the opportunity to make operations more efficient.
"Over the long term, we expect the combination to facilitate improved management of product complexity and drive additional production efficiencies," he said.
Other possibilities include leveraging the combined manufacturing footprint potentially to implement specific plant roles to make sure the operations are used in the most efficient manner to deal with the increased complexity of the global tire business, according to Mr. Kramer.
Specifics will be clearer once integration work begins. He said two items of particular interest will include increasing the supply of Goodyear high-value-added products and greenfield expansion at some of Cooper's lower-cost factories, including in Mexico and Serbia, increasing output.
"For us, expanding onto an (existing) factory is something that gives higher returns on investment capital faster (than building from scratch) as the infrastructure is largely there already," he said,
Additional savings can come by leveraging Goodyear's chemical facilities as a supply source for Cooper's tire plants. "I think that gives us the opportunity to re-capture some of the chemical supply that would otherwise come from third parties," Mr. Kramer said. "It's imperative we look at that.
"We also have a number of very good strategic relationships with suppliers, and we feel we will have the opportunity to leverage those as we add the additional volume that would come along with the Cooper facilities."
Mr. Kramer said Goodyear will examine the business closely during the integration process, with the main objective to determine how best to produce tires its customers want.
"We are looking at how we can utilize this combined footprint the best way," Mr. Kramer said. "The best way to make sure we deal with the increased complexity in the industry. The best way to make sure we're getting the highest levels of productivity. And the best way to make sure we're able to supply premium tires, OE tires and all the tires.
"That's the work that we'll all be doing," he said. "That's what Goodyear has always done, and we will continue to do that."
Tire Business Reporter Jim Johnson contributed to this report.