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February 22, 2019 01:00 AM

Goodyear's Rich Kramer urges industry to adapt, avoid complacency

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    Don Detore, Tire Business
    Rich Kramer gives his presentation during the company's Customer Conference.

    GRAPEVINE, Texas—The evidence of permanent shifts that have occurred in the past few years in how we think or act—what Rich Kramer, Goodyear CEO, chairman and president, calls an "inflection point"—is about as apparent as a flat tire.

    Just look around the average household, he told those attending the tire maker's recent annual dealer gathering. That dinner sitting on the kitchen table might have been delivered by GrubHub or Uber Eats, both mobile food services. That couch in the living room? Perhaps that was ordered from online retail site Wayfair.

    That comfortable mattress? It might have been shipped to your door, delivered in a small box by UPS after it was ordered from one of the countless mattress-in-a-box retailers, there for you to try free for the first 100 days.

    And that doesn't even account for those Amazon boxes you'll find throughout most houses, evidence of all the goods, from A to Z, that can be ordered from the online retail giant.

    Each of those represents an inflection point, Kramer said, a widespread change in which some things never are the same. It can happen with a new product, a new technology or another business model.

    "Sometimes, arguably most of the times, we don't recognize when an inflection point actually happens," Kramer told nearly 2,500 Goodyear customers, associates and vendors during his annual keynote address at the Goodyear Customer Conference, held Jan. 27-29 at the Gaylord Texan in Grapevine. "We only recognized (an inflection point) after it has occurred."

    Case in point: The Great Recession of 2007-08. The inflection point didn't happen when banks went bankrupt, he said. Instead, the inflection point occurred much earlier with low interest rates, the onset of sub-prime mortgages and the housing bubble.

    "When that bubble burst, the recession was full on," Kramer said. "It was here."

    The tire industry, he told dealers during his 40-minute talk, is at an inflection point, pointing to the advance of technologies that are impacting the industry, such as electric and/or autonomous vehicles and the proliferation of ride-sharing.

    "The rapid development and growing comfort of this kind of disruption is only going to increase," he said.

    Kramer identified four areas that indicate inflection points:

    • Changes in OEM business models;
    • Changes in how vehicles are being used;
    • Shifts in competition; and
    • The changing consumer.

    The Big 3 domestic auto makers—Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles (FCA)—are eliminating or severely reducing the models of sedans they manufacture in the coming years in favor of more profitable light trucks, SUVs and CUVs.

    "Candidly, it's hard to comprehend," Kramer said, "but the car companies are actually getting out of the car business."

    In addition, these companies are firmly planting themselves in the mobility space—investing millions in mobility options, including owning and operating fleets—clearly signaling a new business model.

    "That's an inflection point," Kramer said, "and nothing in the car industry is ever going to be the same."

    Meanwhile, consumers' approach to vehicles continues to evolve, Kramer said.

    Cars, he said, sit idle 95 percent of the time. And he said, the cost to operate a vehicle is roughly $2 a mile.

    Electric vehicles, he said, or ride-sharing, are likely to reduce that cost to 50 cents per mile or less.

    With improved reliability and lower cost, "all that adds up in my world as having a significant impact on mobility," he said.

    The model that is developing, he said, is on-command vehicles, especially in urban environments.

    "Every day people are becoming more comfortable with the concept of shared, as an alternative to personally owned (vehicles)," Kramer said. "I suggest the entire purpose of the car is at an inflection point and pretty soon, it's never going to be the same."

    Competition, he said, is fierce, particularly from startups that believe they can make the better tire. They don't worry about what can't be done; they only think of what's possible.

    "That's different and dangerous competitors," Kramer said. "Some of these will succeed, but more than likely most of these are going fail. But they represent a different way to look at our industries. We ignore that disruption at our own peril."

    The faces of competition also are changing, Kramer said. Competition has wrought consolidation and new investors who focus on growth more than profit.

    "I don't think I exaggerate when I say the traditional ways of competition are gone, and similar formats and conventional goals are behind us to a large degree," Kramer said. "Competition is at an inflection point, and it will never be the same."

    Finally, the changing consumer, he said, continues to affect the tire industry. Convenience drives most consumers to such staples of today as Uber, Wayfair and Amazon.com.

    "They sound crazy, even unimaginable until they were inevitable," he said of these new ventures. "We might even say, until they were expected."

    Kramer said the tire industry must adapt—with balance—while avoiding complacency.

    And he reminded the assembled dealers that not only is the tire industry strong today, it also will be in the future.

    All vehicles, owned or shared, with a driver or autonomous, with elective motor or gas combustion engine, they all need tires now and they're going to need them tomorrow, Kramer said. "Our business is strong. Keep that in mind. Never lose sight of that."

    It is just as important, he said, to recognize the inflection points that shape our lives, particularly in the tire business. Be alert, he said, as changes often are gradual and the results aren't always apparent initially.

    "The changes impacting our business have started even though you can't see them," he said.

    Kramer lauded the Goodyear dealers for their commitment to the brand. At the end of his speech, he paid tribute to family-owned tire dealership and distributor Max Finkelstein Inc., which has been a Goodyear dealer for 96 of its 100 years in business.

    Kramer told the dealers that miles traveled are expected to increase, and "that means more tread rubber is burned and that means more tire sales. And that is a fantastic thing for all of us."

    Goodyear, he said, has a culture of innovation, and it continues to have a "seat at the table" with OEMs, as they shape the industry of the future.

    "None of these things alone will win in the tire business," Kramer said. "But all together we can turn that inflection point into a springboard of a new generation of success.

    "Some things are going work. Some things won't. But as (Winston) Churchill said, 'Success is not final, failure is not fatal: It is the courage to continue that counts.'"

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