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Goodyear Tire & Rubber shares traded higher after the company announced a plan to overhaul its portfolio by potentially selling three assets, reducing debt, and cutting costs.
Goodyear
(ticker: GT), based in Akron, Ohio, said it is considering divesting its chemicals operation, the Dunlop Tires brand, and a business selling tires for the mining and construction companies. A sale should bring significant value to shareholders as well as enable the company to focus future investments on the Goodyear brand, management said on a conference call Wednesday morning.
The cost cuts will involve adjustments to the company’s overall footprint, consolidating vendors, and substituting and consolidating the materials it uses. It will lead to an annual, run-rate benefit of $1 billion by the end of 2025, the company said.
Goodyear also plans a debt reduction of about $1.5 billion, factoring in about $1.1 billion allocated for restructuring purposes, a move that it estimates will bring its debt close to an investment-grade credit rating.
The portfolio revamp comes as Goodyear faces competition from new entrants into the market as well as from low-priced tires imported from Asia, especially in the European and Latin American markets. Goodyear said its fixed costs have steadily increased since the pandemic, and that while inflation has subsided from its peak, higher wages and energy costs are still a problem.
“Our transformation plan represents a clear path to create a more profitable and focused Goodyear,” said Goodyear CEO Richard Kramer, referring to what the company called its “Goodyear Forward” plan.
The company also said Kramer plans to retire next year. The Goodyear board has retained a search firm to find a new chief executive.
The stock rose 2.5% to $14 on Wednesday morning.
Write to Karishma Vanjani at [email protected].
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