FEBRUARY 16, 1998
What is Goodyear up to?
THE Goodyear Tire & Rubber Company seems intent on pulling out of Grand Prix racing, even if it makes little commercial sense to do so. Last week the American tire giant - which is battling with Bridgestone and Michelin to be the world's largest tiremaker - announced that it is intending to double its sales within five years. The plan was unveiled by Goodyear's president Sam Gibara, who has been preparing for the move since he took over as chief executive in January 1996.
If he is successful Gibara will turn Goodyear into the dominant tire company in the world. To achieve this aim, however, he needs to cut costs and boost productivity with the widespread introduction of new high-technology tire-making machinery. This will be expensive and will mean that Goodyear must find a way of shedding 35% of its global workforce of 95,000. This will cause considerable disruption within the company, despite Gibara's suggestion that it can be achieved by the non-replacement of workers who leave and early retirement programs.
Most analysts have concluded that Gibara cannot possibly achieve his stated aim unless the company merges with or takes over another major tiremaker and there are rumors that Gibara is targeting the world's fifth largest tire company Sumitomo╩Rubber╩Industries of Japan.
Sumitomo is one of a group of Sumitomo companies which are linked by cross ownership. It has controlled the Dunlop tire brand since 1984. In recent years, however, this highly-diversified trading empire has been hit hard by the slowdown in the Japanese economy and in recent years has been trying to slim down its product range and build internationally on the products it retains. Selling Sumitomo Rubber Industries to Goodyear would raise capital to help that process and would get Sumitomo out of the highly-competitive tire business.
The advantage for Goodyear would be an immediate leap in the company's market penetration in the Far East, where Sumitomo is strong. It would also help to increase Goodyear's sales in Europe because Dunlop is still a very strong brand name although in recent years Dunlop has not had a very dynamic image in Europe.
It would make sense if Goodyear does bid for Sumitomo for the American company to immediately transfer its F1 personnel, technology and contracts to Dunlop so that Williams and Ferrari would use the same tires in 1999, although these would be known as Dunlops rather than Goodyears. This is much the same idea as the switch which Rothmans International has made at Williams, dumping the Rothmans branding in favour of Winfield colors.
Dunlop was a major name in Grand Prix racing in the 1960s, winning 83 victories and eight World Championships between 1958 when it entered F1 with Vanwall and 1970.
This is purely speculation at the moment, although many F1 observers find it very odd that neither Williams nor Ferrari - Goodyear's top teams - have jumped to Bridgestone. Logically, if Goodyear is going to pull out at the end of 1998, the best thing for both teams would be to switch as quickly as possible as McLaren and Benetton have done.
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