Goodyear, Sumitomo to dissolve global tire alliance
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AKRON, Ohio -- Goodyear and Sumitomo Rubber Industries Ltd. have agreed to dissolve their 16-year-old global tire alliance, with Goodyear to pay SRI $271 million initially and $55 million in three years’ time.
The agreement resolves a 15-month-old dispute between the two companies that involved possible violations of antitrust laws.
"The agreement enables both companies to avoid the cost and uncertainty of the arbitration process," according to a statement posted on Goodyear's website today.
Through the agreement Goodyear secures the rights to sell Dunlop-brand consumer and commercial tires in the replacement markets in North America and the replacement and original equipment markets throughout most of Europe.
Sumitomo will acquire Goodyear’s 75-percent interest in Goodyear Dunlop Tires North America Ltd., including the venture’s factory in Tonawanda, N.Y., along with rights to sell Dunlop-brand tires to Japanese vehicle makers’ subsidiaries in the U.S., Canada and Mexico.
“While we have derived value from the alliance over the last 16 years, Goodyear is well positioned today to pursue our strategy on our own,” Goodyear CEO Richard Kramer said in the statement. “This successful resolution increases our flexibility to grow profitably as we continue to focus on delivering strong performance and sustainable economic value.
“We are committed to a smooth and orderly transition that will be seamless to our customers and consumers in North America, Europe and Japan.”
Goodyear said the transaction will not impact its 2015 and 2016 financial targets or capital allocation plan. The outlay is included in the approximately $600 million designated for restructurings under the capital allocation plan.
Sumitomo said the agreement will give it a “greater degree of autonomy” over its business, including original equipment tire business with Japanese automakers, and will allow the tire maker to have its own manufacturing and r&d in North America and Europe.
Sumitomo also noted the deal will help it build the Falken tire brand into a stronger, more global brand.
Goodyear and SRI formed the global alliance in 1999.
At that time, Goodyear paid Sumitomo $936 million to settle the difference between the value of the respective businesses being consolidated and the agreed-upon shareholding ratios.
Other aspects of the agreement include:
The transaction is subject to customary closing conditions, including regulatory approvals as well as SRI’s completion of a labor agreement with the United Steelworkers union for the Tonawanda plant, the companies said.
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