AKRON—Goodyear and Sumitomo Rubber Industries Ltd. have dissolved their 16-year-old global business alliance, effective Oct. 1 in accordance with the terms of their previously disclosed agreement reached in May.
The completion of the transaction will resolve the pending arbitration filed in January 2014, Goodyear said.
“This successful resolution enhances our flexibility to grow profitably as we focus on delivering strong performance and sustainable economic value,” said Richard Kramer, Goodyear chairman, CEO and president. “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.”
Sumitomo Rubber Industries Ltd. expects the dissolution to enhance its “management flexibility” in terms of branding strategy and regional business strength. The Japanese firm 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.
In terms of regional operations, SRI said it will be able to strengthen its competitiveness in North America by expanding its original equipment tire business with Japanese vehicle makers and its motorcycle tire business. SRI said 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, for car, light truck and motorcycle tires in Tonawanda, N.Y., and a test track in Huntsville, Ala.
In Europe, the dissolution will enable SRI to establish its own manufacturing and R&D bases. The company only recently opened a 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.
SRI expects to disclose “in a timely manner” the impact of the dissolution on its fiscal 2015.
Goodyear said the transaction does not impact the company's existing financial targets or capital allocation plan. It will include the impact of the transaction in its full-year outlook beginning in February 2016.
Under terms of the agreement:
• Goodyear retains exclusive rights to sell Dunlop-brand tires in the replacement market and to non-Japanese auto manufacturers in the U.S., Canada and Mexico, as well as exclusive rights to sell Dunlop-brand tires in replacement and original equipment markets in European countries where the former joint venture exclusively served the market;
• Goodyear regains exclusive rights to serve Japanese markets with Goodyear-brand tires;
• Goodyear acquired from SRI its 25 percent interest in Goodyear Dunlop Tires Europe B.V.:
• SRI acquired Goodyear's 75 percent interest in Goodyear Dunlop Tires North America, with the caveat that Goodyear maintains control of Dunlop-related trademarks for tire-related businesses in North America while granting to SRI an exclusive license to develop, manufacture and sell Dunlop tires for motorcycles and for Japanese-owned vehicle manufacturers in North America;
• SRI acquired Goodyear's 25-percent interest in Dunlop Goodyear Tires Ltd., a Japanese venture;
• Goodyear acquired from SRI its 75-percent interest in Nippon Goodyear Tire Ltd., a Japanese venture;
• Goodyear sold to SRI the Huntsville, Ala., test track used by Goodyear Dunlop Tires North America.
• SRI obtained exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa; and
• Goodyear paid SRI $271 million.