New Goodyear Strategy
Goodyear Tyres has announced radical changes in its production struture, which are a reflection of the difficulties facing tyre producers in the current climate. Goodyear has announced the closure of a number of tyre plants around the world, with the suggestion that more cuts are in the pipeline.
At present, the tyre market is extremely competitive. Growth has stagnated while production costs have risen. This has prompted Goodyear to undertake a radical plan to minimise costs. Plants across North America and Canada will be closed this week as part of this cost cutting exercise. Tom Hogeboom, spokesman for Goodyear, announced that the strategy made sound economic sense, “The week includes Canada Day and Independance Day, when production tends to drop anyway. It’s not a decision we take lightly, but the marketplace is telling us it’s something we have to do”.
Goodyear has also announced that it will be closing its tyre plant in Somerton, north of Melbourne, Australia, in an attempt to cut costs. This will reduce the company’s capacity by 3 million tyres per annum, and will bring with it cost savings of US$35m. 587 workers will be made redundant. The company has announced that it plans to reduce high-cost capacity by 25m units, with concommitant savings of US$150m.
Goodyear will then divert funds to more cost-effective areas of production. 4 plants in the US are to be refurbished at a cost of $700m, over the next five years. Goodyear are also set to invest between 1 and 1.3 billion dollars over the next three years to develop production in more cost-effective countries, such as China and Brazil.
All of this had a serious impact on Goodyear’s share price. Shares in the giant tyre company fell by 11.2 percent, to their lowest price since 2006, in response to the announcements.
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