Editorial comment: Goodyear came close to a perfect meeting
Based on its shareholders' meeting on April 8, 2008, Goodyear Tire & Rubber Co. is doing well, both financially and strategically. Everything seemed to proceed according to plan.
The annual meeting, held at the company's headquarters in Akron, Ohio, was sparsely attended by both shareholders and the press (just me, a local radio reporter, and two journalists from the Akron Beacon Journal), in contrast to past years. Bad news is good news, while good news is, well, not covered.
In my experience, unrest breeds attendance, while peace brings either satisfaction or indifference. When things are going poorly for a company, only the board members consider taking the day off.
On this occasion, all 13 board members were on hand. Two retired at the meeting, leaving a diverse, 11-member board, including Chairman, CEO and President Bob Keegan, to run the company. The Eleven were re-elected to one-year terms by 69.5% of the outstanding voting shares; only a little more than 5% voted nay.
The retiring board members, John Breen (Sherwin-Williams Co.) and William Hudson Jr. (AMP Inc.), were two holdovers from the pre-Keegan period, which began in 2003 when he took over as CEO and chairman. He joined the company and the board in 2000 after leaving Eastman Kodak Co., where he was president of its global consumer imaging business.
Only Steven Minter, formerly president and executive director of The Cleveland Foundation, has been a board member longer than Keegan. He has served under five Goodyear CEOs.
Goodyear's 2008 Performance and Management Incentive Plans were adopted easily. The plans give Goodyear the financial power to attract and retain executives. That includes the ability to provide "performance-based compensation."
There were no shareholder proposals to be acted upon at the meeting, another positive sign.
There are a number of reasons Goodyear thinks it is well-positioned in 2008, according to Keegan.
1. High-margin products. "Our company's product, brand and customer mix has become considerably richer," he said. "We are more focused on the premium segments of the global tire markets, which have relatively inelastic pricing dynamics (i.e., stable pricing)."
2. Financial strength. "Our balance sheet has improved dramatically, driven by strong execution against our capital structure improvement plan." Total debt and legacy obligations are expected to be close to $6 billion by the end of 2008, compared to $12 billion just two years ago.
3. Manufacturing cost reductions. "We have made significant improvements in our fixed cost structure. Since 2004, Goodyear has reduced high-cost global capacity by more than 25 million units and closed six tire manufacturing plants around the globe. So we like our position."
Keegan said Goodyear is "accelerating planned investments to increase our capacity to produce high-value-added tires, and thereby increase our margins."
The final sign of prosperity at the meeting was the lack of any shareholder questions at the end of Keegan's remarks. (One year, former Chairman and CEO Sam Gibara left without opening up the floor to questions.)
In 2007, Goodyear's net income totaled $602 million, which is a lot compared to the $330 million loss it posted in 2006. In addition, net sales were up 4.7%. First-quarter results should be announced by the end of April.
No one making waves. Executive control. An optimistic forecast. What a meeting!
When we all look back at this time in Goodyear's history, we will remember it as the Bob Keegan Era, or, as Goodyear might say, a time of inelastic Keegan dynamics.
Bob Ulrich, editor, Modern Tire Dealer