Goodyear, Sumitomo to dissolve global tire alliance

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:

• Goodyear will retain exclusive rights to sell Dunlop-brand tires to non-Japanese vehicle makers in North America.
• Goodyear will acquire SRI’s 25-percent interest in Goodyear Dunlop Tires Europe B.V., including six tire plants, in Amiens and Montlucon, France; and Furstenwalde, Hanau, Riesa and Wittlich, Germany.
• Goodyear’s Dunlop-brand rights in Europe cover motorcycle and racing tires in addition to consumer and commercial tires.
• SRI will obtain exclusive rights to sell Dunlop-brand tires in certain countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa. SRI has a plant under construction in Turkey and in late 2013 acquired the Dunlop-brand rights throughout most of Africa and the Middle East from Apollo Tyres Ltd.
• Goodyear will acquire SRI’s 75-percent interest in Nippon Goodyear Ltd., which serves the replacement market in Japan with Goodyear-brand tires.
• SRI will acquire Goodyear’s 25-percent interest in Dunlop Goodyear Tires Ltd., which serves automakers in Japan with Goodyear- and Dunlop-brand tires.
• Goodyear will regain exclusive rights to serve the Japanese replacement and original equipment markets with Goodyear-brand tires.
• SRI will continue to have exclusive rights to sell Dunlop-brand tires in the Japanese replacement and original equipment markets.

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.