Now that the carbon black dust has settled, and Goodyear has officially become the owner of Cooper Tire & Rubber Co., it's time to analyze the merits of the deal while pondering its impact on the tire industry.
There is no doubt that the $2.5 billion cash-and-stock deal, finalized June 7, is one of the largest in industry history, perhaps just as chain-rattling as Bridgestone's acquisition of Firestone 33 years ago. It will be difficult to find one person in the industry who won't be affected by the deal.
What are some of the initial negatives of the deal?
For starters, it cuts the number of major U.S.-based tire makers to just two—Goodyear and Titan International Inc.—among the leading global tire companies. In effect, the merger ends the independence of a 107-year-old company that had grown to employ around 10,000.
It no doubt will cost jobs—"synergies" as it is called in the business world—as duplicate positions get eliminated.
And that doesn't begin to account for the economic impact on affiliated businesses and communities—particularly in Findlay, Ohio, where Cooper is based—once these synergies shake out.
We think, however, the positives that come from the deal will far outweigh any collateral damage it leaves behind.
The move strengthens an already muscle-bound Goodyear, one of the most recognizable names in any industry, in any part of the world. Cooper's broad and cost-effective portfolio of Tier 2 and Tier 3 products is a perfect complement to Goodyear's range and will help bolster the offerings of its dealer network.
Goodyear, in turn, will benefit the Cooper brand, bringing its technological advancements, business partnerships with big names and startups alike, and keen eye for sustainable mobility.
It remains to be seen what the revamped tire maker decides to do with distribution, a key question for dealers and wholesalers alike. Will Goodyear end Cooper's long and successful relationship with American Tire Distributors and make TireHub Inc. its main distributor?
At least one analyst, James Picariello of Keybanc Capital Markets Inc., said he believes Goodyear will maintain Cooper's relationship with ATD, even if TireHub takes over some of the distribution.
"I think Cooper will have the autonomy to keep doing what they're doing," he said.
Some Cooper dealers have expressed concern that Goodyear will change its programs, allocations and/or approach.
Perhaps. That is inevitable as a new owner takes over and implements business practices it has found successful.
But Goodyear hasn't maintained its status as the third largest tire maker in the world by ignoring sound business principles, no matter where they come from.
The move cements a legacy for Richard Kramer, Goodyear chairman, CEO and president, who helped execute the deal, doing so while preventing any news leaks that might have sabotaged the whole thing.
Kramer's legacy now will be tied to the Cooper acquisition and the combined company's success moving forward.
And we agree with what Picariello said, in describing why he revised his industry growth forecast for the rest of 2021—to 12 percent from 7 percent.
"I think things are only getting better for the tire industry," he said, "and things are going to get better for Goodyear and Cooper."
This editorial originally appeared in Tire Business, a sister publication of Rubber & Plastics News.
