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FEBRUARY 8, 1999

Goodyear grabs Dunlop

ALTHOUGH it is being presented as a merger, Goodyear has finally concluded its talks to take over SumitomoÊRubberÊIndustries, the owner of the Dunlop brand. The deal means that Goodyear now has around 23% of the world tire market and has moved clear of the battle for leadership with Michelin and Bridgestone.

The takeover, which takes the form of six joint ventures around the world - four of which will be Goodyear-controlled - will see the American company acquiring all 10 of the Sumitomo factories in the United States and Europe. It will also take control of global purchasing and research and development.

The aim of the deal is to give Goodyear a strong position in Asia while also turning Dunlop into a more effective weaponÊinÊtheÊbattle with Michelin in Europe. At the moment the French giant has 27% of the European car tire market. The combined Goodyear-Dunlop empire will account for 20% of the European sales with cost-cutting measures creating a much more competitiveÊDunlop.

The deal may have important consequences for Grand Prix racing. Goodyear says it is not coming back in the foreseeable future but it would be a logical marketing move for Dunlop to enter F1 to boost sales in Europe. This is not thought to be likely to happen until global cost-cutting measures have been imposed - and that could take two or three years.

Goodyear might be forced to act if Michelin now decided to enter F1 in an effort to bolster its European sales market. This would be a sensible move for the French company. On the other hand Michelin may simply conclude its rumored takeover of Yokohama, which would boost its share of the tire market to nearly 22%. That would leave Bridgestone in third place in the battle of the tire giants and the obvious response would be to snap up one of the surviving middle-sized tire companies. The obvious targets would be either Continental (6.3%) or Pirelli (4.4%).

A burst of consolidation in the tire industry could easily lead Bridgestone to conclude that it needs to invest the money it uses for F1 in other areas and that would be a major setback for Grand Prix racing which would then be without a tire supplier. The last time that happened Bernie Ecclestone was forced to buy his own tire company (IRTS) and have the British Avon tire company manufacture racing tires for him.