Goodyear to cut jobs, divest Asia-Pacific locations

AKRON—Goodyear is planning to retool its Asia-Pacific operations to a third-party distribution and retail sales model, with the goal of improving profitability in Australia and New Zealand.

The proposed "rationalization plan," revealed in an 8K filing with the U.S. Securities and Exchange Commission on Sept. 19, said the company plans to:

• Eliminate approximately 700 positions;
• Exit nine warehouses; and
• Facilitate the sale of approximately 100 retail and fleet locations in the region.

Goodyear estimated the plan would improve the Asia-Pacific segment's operating income by around $50 million to $55 million by 2025 and annually thereafter, as a result of selling those locations as well as due to lower administrative and general expenses.

Goodyear said the plan is subject to consultation with representatives of employees in the region. It is targeting year-end 2024 for completion.

According to the filing, the plan is "part of a broader set of actions" that Goodyear expects to take in order to "streamline its business, improve its competitive position and drive growth."

Goodyear operates more than 370 retail outlets in Australia under the Beaurepaires and Goodyear Autocare brands, alongside the Dunlop Super Dealer affiliated dealer network of about 150 independent dealers.

In the filing, the Akron-based tire maker said it plans to discuss the moves in more detail during its call with investors in the fourth quarter.

Goodyear estimated that the costs to execute the plan will be between $55 million and $65 million. It said in the filing it expects to record around $20 million of pre-tax charges related to the plan in the third quarter and another $5 million of pre-tax charges in the fourth quarter.

The rest of the costs will occur in 2024, Goodyear said.

News of the plan comes two weeks after Goodyear unveiled plans to streamline operations across the Europe, Middle East and Africa (EMEA) region that could save the tire maker as much as $100 million.

Goodyear said Sept. 5 that it would cut as many as 1,200 jobs in the EMEA region as part of its broader set of perspectives aimed at more efficient operations. It also emphasized that it plans to create 500 new roles, "principally in its existing shared services organization in Romania."

According to a Sept. 8 SEC filing, the tire maker noted that the job cuts would be made across multiple countries within EMEA.

In its second-quarter financials, Goodyear reported a 65.9-percent drop in operating income for the quarter ended June 30 on 8.6-percent lower sales, results that drove company into the red on a net basis of $208 million.

Segment operating income fell to $124 million on revenue of $4.87 billion, cutting the operating ratio 4.5 points to 2.5 percent. Goodyear cited the negative effects of lower sales volume and higher expenses for the drop into the red.

In the filing, it said it expects its Americas and Asia/Pacific business units to record "meaningful improvements" in margin by year end with solid earnings heading into 2024.

Segment operating income in Asia-Pacific doubled in the quarter to $40 million (up 110.5 percent), based in part on higher sales volume (400,000 units or 5.8-percent increase). Replacement volume increased 3.6 percent, while original equipment volume increased 9.2 percent.

Goodyear recently came to an agreement with shareholder Elliott Investment Management L.P., after the group expressed dissatisfaction with what it called Goodyear's poor stock performance.

As part of the agreement, Goodyear added three board members: Joseph R. Hinrichs, president and CEO, CSX Corp.; Max H. Mitchell, president and CEO, Crane Co.; and Roger J. Wood, former co-CEO, Tenneco Inc.

In addition, Goodyear agreed to establish a Strategic and Operational Review Committee to "oversee and support the board and management's review of various strategic and operational alternatives to maximize sustainable shareholder-value creation and build upon a number of initiatives that Goodyear has been executing," the company said.