AKRON—Goodyear and Sumitomo Rubber Industries Ltd. have agreed to dissolve their 16-year-old global business alliance, with Goodyear to pay SRI $271 million initially and repay $55 million in debt owed SRI within three years.
The agreement resolves a 15-month-old dispute between the companies that involved charges and countercharges of breaches of the alliance's agreements.
Goodyear alleged SRI had engaged in “anticompetitive conduct in violation of applicable antitrust laws” and SRI subsequently filed counterclaims, alleging “various breaches of the global alliance agreements” by Goodyear.
Both companies said this agreement will allow them to avoid the cost and uncertainty of arbitration to resolve their differences.
Through the agreement, Goodyear secures the rights to sell Dunlop-brand consumer and commercial tires in the replacement markets in North America and the replacement and original equipment markets throughout most of Europe.
Sumitomo will acquire Goodyear's 75 percent interest in Goodyear Dunlop Tires North America Ltd., including the venture's factory in Tonawanda, N.Y., along with rights to sell Dunlop-brand tires to Japanese vehicle makers' subsidiaries in the U.S., Canada and Mexico. It also assumes exclusive rights to the Dunlop-brand motorcycle tires in North America.
“While we have derived value from the alliance over the last 16 years, Goodyear is well positioned today to pursue our strategy on our own,” Goodyear Chairman and CEO Richard Kramer said in a prepared statement. “This successful resolution increases our flexibility to grow profitably as we continue to focus on delivering strong performance and sustainable economic value.
“We are committed to a smooth and orderly transition that will be seamless to our customers and consumers in North America, Europe and Japan.”
Goodyear said the transaction will not impact its 2015 and 2016 financial targets or capital allocation plan. The outlay is included in the approximately $600 million designated for restructurings under the capital allocation plan.
Sumitomo said the agreement will give it a “greater degree of autonomy” over its business, including OE tire business with Japanese car makers and motorcycle tires globally except for Europe, and it will allow the tire maker to establish manufacturing and research and development facilities in North America and Europe, where it goes to market primarily under the Falken brand.
Sumitomo noted the deal will help it build the Falken brand into a stronger, more global brand. It said the “impact of the dissolution of the alliance agreement and the joint ventures on SRI's financials is under review and will be announced once it is identified.”
Goodyear and SRI formed the global alliance in 1999. At that time, Goodyear paid Sumitomo $936 million to settle the difference between the value of the respective businesses being consolidated and the agreed-upon shareholding ratios.