Our View: Goodyear Forward to determine firm's future, Kramer's legacy

Goodyear is embarking on what is arguably the most important period of the Akron-based tire maker's 125-year history.

After Elliott Investment Management L.P., a major shareholder, wrote Goodyear Chairman Richard Kramer a letter in May to spotlight what it called poor stock performance, the firm took what some may see as an unusual tactic. Rather than give a knee-jerk response, dismiss the criticism as unwarranted and try to continue on its path, Goodyear officials went a different direction.

They met with Elliott principals, added three new directors for a fresh perspective on its board and formed a strategic committee to look at all options to boost shareholder value and build on programs Goodyear already started.

Robert Mercer likely would not have approved.

It was, after all, the late Goodyear chairman and CEO who, in 1986, fought the hostile takeover attempt of Sir James Goldsmith and vocally espoused in the years following that Wall Street's insistence that the shareholder be put first was backward thinking.

Mercer said the pecking order should be customers, employees, suppliers and government entities. He argued that if a publicly held firm handled those four properly, the fifth constituency—the shareholder—would make off like a bandit.

But today the emphasis on quarterly success is greater than ever. Meeting expectations is paramount. Posting an investment grade margin can make or break a CEO. Even a seemingly solid report can cause a stock price to plunge if just one piece of the financial house of cards is seen as ready to fall.

It's even more difficult in a traditional, competitive manufacturing industry such as the tire business. In revealing "Goodyear Forward," a plan that the company and its shareholders hope will send their fortunes to a new level, Kramer said the industry was "facing a unique moment in time where fundamental changes to cost structures and competition are reinforcing why Goodyear needs to position itself differently for the future."

With the transformation initiative, Goodyear looks to raise $2 billion by selling its chemicals/synthetic rubber, Dunlop brand and off-the-road tire businesses. It also aims to boost finances by $1.3 billion per year by the end of 2025 through cost reductions and top-line actions, hoping to double Goodyear's profit margin.

Goodyear also will have a new leader. Kramer will retire after 14 years as chairman, CEO and president.

Kramer told financial analysts that the Goodyear Forward transformation plan isn't just a strategy that looks good on paper, but one that is "specific and actionable with detailed timelines and accountability that makes it credible and achievable."

To this point, his tenure is noted for achievements such as guiding Goodyear through the COVID-19 pandemic and leading the acquisition of Cooper Tire in 2021. One analyst, though, sees Goodyear under Kramer as a company that has dramatically underperformed, with margins below that of its rivals.

But the key to defining Kramer's legacy—and the tire maker's future—hinges on the new leader and their team making Goodyear Forward a success.