Goodyear Tire & Rubber Co. remains focused on capturing "the growing demand for premium, large-rim diameter tires." The company says part of that strategy involves"reducing excess capacity in declining, less profitable segments of the tire market."
Consistent with that plan, Goodyear announced it will close its Goodyear Dunlop Tires Germany GmbH consumer tire manufacturing facility in Philippsburg, Germany, by the end of 2017.
In an 8-K filing with the U.S. Securities and Exchange Commission on Oct. 24, Goodyear revealed its plans to close the plant. The proposed plan (it remains subject to "consultation with relevant employee representative bodies") would result in approximately 890 job reductions at the plant.
Once completed, this action is expected to improve the Europe, Middle East and Africa segment's operating income by approximately $20 million in 2018 and $30 million on an annualized basis thereafter.
"Our strategy is focused on increasing Goodyear’s presence in high value segments of the tire market that are growing at rates above the total industry where we can capture the value of our brand and help our customers grow profitably," says Jean-Claude Kihn, president of Goodyear’s Europe, Middle East and Africa region.
"Our customers want more of our premium tires with large rim diameters 17 inches and above. These tires are in high demand by our original equipment customers today and will be needed in the replacement market in the years ahead."
In order to meet the increasing demand for its premium large rim diameter tires, Goodyear says it has and will continue to make substantial investments to develop and deliver innovative products and technology while reducing excess capacity in declining, less profitable segments of the tire market where tire supply exceeds demand.
"The proposal to close our plant in Philippsburg is a difficult choice and we are very conscious of our obligations towards our associates," says Juergen Titz, group managing director of Goodyear Dunlop Tires Germany, Goodyear Dunlop Tires Austria GmbH, and Goodyear Dunlop Tires Suisse SA. "We are committed to responsible and fair solutions for all affected employees and to provide appropriate support."
Goodyear estimates total pre-tax charges associated with this action to be between $240 million and $280 million, broken down as follows:
* $165 million to $190 million is expected to be cash charges primarily for associate-related and other exit costs;
* $75 million to $90 million is expected to be non-cash charges related to accelerated depreciation and other asset-related charges.
The company expects to record $116 million of pre-tax charges in the third quarter of 2016 and approximately $20 million of pre-tax charges in the fourth quarter of 2016 associated with this plan. Goodyear says the majority of the remaining charges will be recorded in 2017.