Goodyear's Kramer talks about online selling
At the 2015 Goodyear Shareholder Meeting in Akron, Ohio, on April 13, Chairman and CEO Richard Kramer talked about Goodyear's 2014 performance and future plans, including its decision to sell tires online.
Here is an unedited copy of his speech.
"Before concluding our meeting, I would like to talk briefly about our performance in 2014 and offer a few thoughts about the future. During the past year, we delivered very strong results and gained momentum on our path to growth.
"Goodyear's segment operating income of $1.7 billion was a record and an 8% improvement over 2013. In addition, we generated $1 billion of free cash flow from operations, marking the second straight year we have reached that level of cash generation.
"These results help fuel our capital allocation plan, which balances investing in our business, paying down debt, and returning cash to shareholders.
"In 2014, we increased our common stock dividend by 20% and delivered almost $300 million to shareholders through dividends and stock repurchases.
"I am extremely pleased with what our teams accomplished over the past year through their disciplined execution of our strategy. Our strategy is built to create sustainable value in the marketplace -- where tires are bought and sold and where our brand can be differentiated from the competition.
"These full-year accomplishments are gratifying and I believe they validate our progress toward creating sustainable value for the long-term and put us on the path to growth.
"In North America, our team delivered record earnings and finished 2014 with its highest quarterly segment operating income ever. We continued to launch products that were a hit with customers. For example, our Assurance All-Season tire reached 1 million units sold faster than any previous new product.
"Likewise, our commercial truck business had a strong year, as fleets continued to embrace our outstanding products and business solutions model. We now have the most fuel efficient combination of commercial truck tires in North America, providing a solution to fleets' biggest challenge: the cost of fuel.
"In 2015, our market-back innovation will not be limited to tires. As you likely have heard, Goodyear will become the first tire manufacturer in the U.S. to start selling consumer replacement tires online; in fact, we will launch the first phase of our roll-out this week. This new buying option will allow consumers to purchase tires online and have them installed by authorized dealers in our industry-leading distribution network.
"The preference for buying goods and services online -- often through mobile devices -- is being driven by a new generation of consumers. In the U.S. alone, 80 million millennials with $1 trillion in buying power are entering the market.
"By embracing digital technology to simplify the tire buying process -- and keeping our network of aligned dealers as an integral part of the process -- we believe we will be the industry leader in this space and with these new consumers.
"Through steady execution of our strategy, North America is on the path to sustainable growth. Looking ahead, our new plant will support that growth in both North America and Latin America. We expect our new, state-of-the-art manufacturing plant to come on line in 2017 and will provide us with more of the high-value tires consumers are increasingly demanding in those regions.
"Innovative products remain a pillar of our strategy, and in the Asia Pacific region, our products won several awards last year. In China, Goodyear Wrangler and Goodyear Excellence Run On Flat were singled out for honors by major Chinese automotive magazines.
"We're expanding our production and distribution to make the most of the increasing demand for our branded products in this growing market. Our state-of-the-art factory in Pulandian, China, is delivering industry-leading products to help increase our brand strength and support our growth in the region.
"Winning in China is at the heart of our strategy in Asia, and we recently opened a new development center in Pulandian to strengthen our competitive position in the world’s fastest growing tire market. The new facility will give us an advantage in the marketplace and help us build closer relationships with OEMs in China to increase the speed to market and meet their needs faster and more efficiently.
"Our investment in China is being fortified by our commitment to Operational Excellence. On my recent visit there, I could see and feel the passion for Operational Excellence in our plant, as we’re running the facility with unwavering focus on continuously improving our supply chain efficiency.
"In Latin America, our steady roll-out of new, high-value-added Goodyear products across the region was a hit with our customers in 2014. In Brazil and Mexico for example, we grew share by delivering a double-digit increase in consumer replacement volume as we’ve completely revamped our portfolio to take advantage of the MegaTrend shift to HVA products.
"Mexico is shaping up to be an impressive story of growth. We are re-committed to winning in this market, and our dealers are enthusiastically embracing our brand and products.
"While Europe, Middle East, and Africa remains our most challenging business, we had year-over-year segment operating income growth of $140 million in 2014. Our product leadership in the region was confirmed by strong third-party endorsements and our continued leadership in European tire labelling. The Goodyear EfficientGrip performance tire recently earned “double-A” grades for wet grip and fuel efficiency, the highest grade possible according to EU standards. We expect to add more AA tires to our highly graded portfolio in 2015.
"In summary, we’re confident in our strategy, and we are building for long term growth. We believe the way to accomplish that is through a balanced approach of investing in our business and carefully managing costs.
"The new challenges and new opportunities that come with new technologies and new consumers demand that we keep our eyes on the future. The tire industry does not grow in a straight line, and we won’t be distracted by short-term swings in the market.
"In light of the progress we have made by executing our strategy, I’m pleased with the state of our business as we look ahead to 2015.
"We believe that this is a great industry to be in, both now and in the future. We play an indispensable role in people’s lives around the world… and we don’t see that changing. The world still moves on rubber.
"Our industry is thriving… and I’m confident that Goodyear will thrive as well, creating value for customers, consumers, and shareholders for the long term."
For more information on the shareholders' meeting, check out "Shareholders are pleased with Goodyear results."