Jon Rich, president of Goodyear Tire & Rubber Co.'s North American Tire business unit, outlined his four-point turnaround plan today in front of independent tire dealers from around the country.
Rich said he is "absolutely convinced" the three-year plan, announced at the 2003 Goodyear Dealer Conference, "will turn us around." The four points are as follows:
1. Stabilize the company. Using "pricing minus cost equals margin" as a foundation, Rich said pricing is determined by the market, but that Goodyear can directly affect the cost equation. "We're going to get very aggressive in cutting our own costs." (By the end of the first quarter, Goodyear will have 1,500 fewer associates than at the end of the fourth quarter in 2002.)
He also said Goodyear has to align its plant capacities with demand. Every plant has to be competitive on a global basis. If they aren't, then "either we fix them... or ultimately close them."
He said Goodyear, which imported about 10 million tires last year, is going to continue to leverage its global manufacturing base.
Goodyear's contract with the United Steelworkers of America expires in April, and Rich is personally leading the negotiations. He said the company has to work out a contract "that will allow us to be cost effective in our factories." In addition, the company "cannot take on added (costs)," or afford a lengthy strike.
2. Greatly simplify the way it does business. "We have to simplify our supply chain," he said. Goodyear's new "integrated supply chain," which was developed by talking with independent tire dealers, will continually evolve.
He mentioned Dunlop as an example. Some $4 million has been spent on 120 new molds for the Dunlop brand in the last nine months. The brand also can be manufactured in five of Goodyear's North American plants now, vs. two originally. He said Goodyear will be "out of the woods" with Dunlop fill-rate problems by June.
Goodyear also has divided its customers into three profit and loss centers: consumer, truck and "everything not on the road."
3. All-around execution, which Rich said is probably the most important of the four points. "We're the world's greatest planners, (but) we're mediocre on execution."
Rich is putting a lot of emphasis on creating a "Six Sigma" corporate structure at Goodyear. Six Sigma eliminates variability and defects while it increases quality. "If we don't have at least $200 million in annual savings (with Six Sigma), I will be disappointed."
As for Goodyear's place in the market, Rich said, "We cannot concede the high ground to Michelin or anyone else." He hinted at Goodyear's technological advancements with run-flats, truck tires (the new G395 LHS) and OTR tires (two-piece assembly).
"We've got to differentiate our brands," he said.
Along with the Six Sigma philosophy is the need for developing key account plans so the company knows what dealers need from them. "At the end of the day, we are not going to have chronically unprofitable customers."
4. "We have to grow our business." Rich said Goodyear will do this by introducing new products and by expanding its points of sale, which will increase its market share.
