In the not-so-distant past, Goodyear’s North American tire business was fighting for its life, the Akron tire maker’s chief executive officer recalled.
Now, the critical North American tire division, which accounts for nearly half of Goodyear’s $21 billion in global sales, is expected to earn $450 million one year ahead of schedule despite demand levels for tires similar to the low 2008 levels of the Great Recession. That year, North American Tire lost $150 million.
“Our success today is the result of decisions and actions that were needed to change the very essence of our business,” Rich Kramer, Goodyear Tire & Rubber Co.’s chairman and CEO, said Thursday. Kramer was the keynote speaker at the monthly Akron Roundtable where he talked about Goodyear’s business transformation and its historic ties to Akron.
Kramer noted that Goodyear by next April will move into its new corporate headquarters on Innovation Way, the former Martha Avenue, in Akron. The decision to build a new headquarters in Akron and remain here “honors the legacy of our company” and of Akron, he said.
“At the same time, we’re not bound by that history,” Kramer said. “We are not committing to the Akron of the past. We are committing to the Akron of the future.”
The roots of Goodyear’s transformation go back to 2000 when the company had a very different business model, Kramer said.
Goodyear at the start of the new millennium was driven by volume, with the objective to keep its 14 North American tire factories full, he said.
“We were trying to serve all customers and be all things to all people,” Kramer said. Goodyear then was manufacturing-centric and had a “push” model, meaning it wanted its customers to buy tires more than they demanded from the company.
The company sold 90 million tires a year, with about a third Goodyear brands, a third used as original equipment on cars and trucks and a third as “private label” tires made by Goodyear but with another brand name on it, Kramer said.
“We were profitable in only one of three parts of our business and our products were in danger of becoming a commodity,” Kramer said. “The model didn’t work and our results showed it.”
Company culture had to change, too, he said, because people were working more as individuals, not as teams.
“We were more entrenched than adaptable,” he said.
Long-time Goodyear employees felt that anyone without decades of experience didn’t understand the tire business, he said.
Those issues bumped up against the company’s debt and legacy expense-laden financial health, creating a complex series of problems, Kramer said. Goodyear executives listened to customers give hours of “extreme and unrelenting detail” of problems they had, he said.
Goodyear started to fix things by focusing on its brand, “our most valued asset,” Kramer said. It streamlined portfolios and got rid of underperforming tires and got out of the private label tire business. It more carefully chose which Goodyear tires were used as original equipment to improve profitability and for a better chance at getting replacement tire sales, he said.
Goodyear also gave its dealer customers more attention — and also dropped some customers that were not buying into the company’s turnaround strategy, he said,
Goodyear turned to innovation, Kramer said. In 2004, it introduced the Assurance line of tires, which is still going strong today and is one of the best-selling tires in the company’s history, he said.
The company refinanced itself, which gave it the time to implement the new strategy, Kramer said.
“We believe that much of our success has come from attracting people from outside the industry while investing in the continued development of long-time Goodyear associates,” Kramer said. That resulted in a creative and innovative combination of new perspective with deep tire knowledge, he said.
“We’ve turned ourselves around in North America with the reinvention of our business model,” Kramer said.
That should put Goodyear on the path to continued success, he said.
Goodyear is guided by patterns it has identified and calls the Seven MegaTrends that define the industry and play to the company’s strengths, he said. The trends include environmental sustainability
“Now, we are anticipating the needs of the marketplace,” Kramer said.
He also noted that in 2014 Goodyear will unveil its newest blimp, a state-of-the-art semi-rigid Zeppelin model that will replace its current fleet over the years.
The company’s new headquarters on Innovation Way was designed to encourage a new, more collaborative and creative way to work, he said. The new building “will reflect the spirit of Goodyear and a progressive Akron,” Kramer said.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com