Goodyear's Keegan: 'What a difference a year makes!'
Earlier today, Goodyear Tire & Rubber Co. Chairman, CEO and President Bob Keegan spoke at the Akron (Ohio) Roundtable. His remarks focusing on "The Pathway from Adversity to Success: Leadership Lessons" follow.
"I am proud to have an opportunity today to talk about The Goodyear Tire & Rubber Co. and all of the people who are working very hard to return Goodyear to the stature that it, and frankly the city of Akron, deserves.
"For 106 years now, Goodyear and the community of Akron have shared good times and bad, enjoyed promise and faced adversity -- all the while helping to support each other through those difficulties.
"I wasn’t here at the time, but the stories about the way the city rallied around Goodyear during the takeover attempt of the late '80s is a support model that other companies can only dream about. And when several large companies started to relocate their headquarters elsewhere, Goodyear stood its ground, continuing to invest in the future of Akron.
"That mutual support -- the ongoing relationship of Goodyear and Akron -- is certainly appreciated by me, by all of us at Goodyear.
"For those of you following both the fortunes and the misfortunes of our company, I would hope that despite some very recent issues that we have dealt with directly, you are starting to see more fortune than misfortune. I know that I am.
"I’m not about to leave you with the impression today that we’ve achieved our ultimate goals. We’ve still got a long road ahead.
"But if I put in perspective where we are today vs. where we’ve been, I’m confident the pathway that we are following will lead us from adversity to success.
"Well, what a difference a year makes!
"The year 2003 was one of challenges. Many people who follow us closely, quite frankly, were not convinced of our ability to meet those challenges.
"We faced issue after critical issue, each with its own significant potential consequences. We faced them head-on with smarts, commitment, courage and confidence.
"We needed to rebuild relationships and our credibility with our network of independent tire dealers in North America. We accomplished that huge task.
"We had to launch a successful refinancing early in the year to extend our financial obligations to the point where we had the ability to execute our turnaround plan. We did it! And as you’ve read these past few weeks, we’ve successfully refinanced a portion of that debt again in ’04.
"We went through very painful -- but critically necessary -- job cuts to reduce our cost base. We did what was necessary.
"We faced difficult negotiations with the United Steelworkers of America in which, quite frankly, we needed concessions of unprecedented proportion that would provide us the financial flexibility to support our turnaround plans. We did that, too, by forming a solid partnership with the USWA’s strong leadership team.
"And just when we didn’t think any more curves could be thrown our way, we had to face a financial restatement near the end of the year, in part because of unreconciled accounts primarily associated with our implementation of a new computerized accounting system in the late 1990s. We are still working through related issues and we are hopeful of closing our books soon.
"We were able to clear these ’03 hurdles one by one, and I am pleased to say that we continue to make meaningful progress in our businesses.
"I’ve said recently in my public comments that six of our seven businesses are experiencing both market and financial success, and the seventh -- North American Tire -- now has positive momentum. This momentum is critically important in a business that accounts for roughly $7 billion in sales, about half the company.
"The reasons behind this momentum can be attributed to the North American Tire turnaround plan that Jon Rich, the leader of this business, put in motion when I put him into that position in December of 2002.
"That plan is firmly based on the focus that Jon and his team now have on the seven drivers of our business, what I refer to as the 'Seven Reasons to Believe,' that make up the core of our company’s strategy moving forward.
"Let me elaborate on these seven reasons/seven strategies and what we need to be doing and are doing to make them a reality.
"We at Goodyear fully recognize that, as with your businesses, strategies are important, but execution ultimately drives wins.
"These seven reasons to believe are not in rank order of importance, except for the first one -- leadership. Why leadership above all others? Because without the right people in the right positions throughout our businesses and throughout our company, the others simply will not be executed successfully.
"The right leadership is critical. We’ve already taken major steps globally, (paying) particular attention to North American Tire, to strengthen our overall leadership, experience and expertise.
"I’ve said many times in recent customer and investor meetings that we now have the right leadership in place for this company to execute a significant turnaround.
"I’ll talk more about leadership in a few minutes when I’ll share with you some discoveries about myself and my team in times of extreme challenge.
"But suffice it to say, this leadership team is well tested with the events of the past year.
"Our second reason to believe, a 'focus on cash,' has resulted in positive cash flow through the publicly reported periods both in our company and in North America, despite our earnings difficulties.
"Going forward, we’ll drive cash flow through much better margins, selective investment and working capital management -- and an overriding insistence that cash expectations drive our decisions.
"The third reason to believe -- a lower cost structure -- is critical when you consider the headwinds that we, and other tire companies, continue to face. These headwinds include rising raw material, health benefit and pension costs.
"We’ve made significant inroads here. As I mentioned earlier, we achieved the groundbreaking three-year union contract that will result in significant savings against those headwinds.
"We have also driven productivity gains through our efforts in Six Sigma and lean manufacturing -- to the point that our customers are now asking us for help in driving cost out of their businesses.
"In summary, we’ve made difficult cost choices and will continue to do so. If an activity adds value, we’ll feed it. If it doesn’t, we’ll eliminate it -- period!
"Leveraged distribution is the fourth reason to believe in Goodyear’s turnaround capability. We have the broadest and deepest dealer network in our industry. However, we haven’t leveraged this powerful asset fully.
"To do so, we’re changing to become a team that focuses on building our customers’ businesses, not simply selling tires.
"In February, we had the best dealer meeting in the history of North American Tire as measured by our dealers.
"The changes in the attitude and the confidence of our dealers have been very gratifying to me personally, particularly given that, only a year ago we were struggling in both our performance as a supplier and our overall strategic dealer relationships.
"I heard nothing but positives out of that pivotal meeting. And the fact that I heard similar positive comments from our dealers indirectly through both the media and the financial community is especially gratifying.
"I had one analyst tell me he couldn’t find anyone who had a negative thing to say. That’s certainly an unprecedented event in our industry.
"Next on our list of reasons to believe is building brand strength.
"We continue to improve our consumer market share globally in the Goodyear brand business, and have a great portfolio of brands. We are now positioning our brands effectively and investing with sufficient dollar weight to grow them.
"While I would not dispute some of the struggles we’ve had from the financial perspective of late, the Goodyear brand is not broken in the minds of the tire consumer. The reality is quite the contrary.
"In fact, a recent consumer survey of Wall Street Journal readers ranking familiarity among auto parts and tire suppliers ranked Goodyear number one.
"Reason to believe number six is product leadership. We have recently introduced the Assurance family of tires -- the best performing broad market passenger tires you can buy, designed and developed right here in Akron, Ohio.
"We are extremely proud of the performance of these tires. And you should be, too, for what it says about Akron....
"I will also tell you that, within the past year, we introduced impactful new truck tires in each of our global markets. Our customers are telling us this gives us the best performing truck tire package in the industry.
"We made difficult choices two years ago. We believed we could win in the truck market. To do so we reorganized; we injected new leaders; we devoted significantly more 'R&D' dollars.
"Our improved position today is the defacto result of the strength of our convictions two years ago.
"Our seventh reason to believe is an advantaged supply chain.
"This one cuts right to the heart of what’s important, and that’s our service level to customers.
"Our new supply chain organization was designed, staffed and funded to create a competitive advantage in our industry for our customers and for us.
"It’s designed to streamline and simplify the order process with unprecedented accuracy, and to get the right tire in the right place at the right time -- and accomplishing this at low cost with low inventories.
"The true story of our success ultimately will be measured by our customers.
"I will tell you that we are on our way, and we are attacking our goals very aggressively. We entered 2004 with a great deal of momentum. I will also tell you that we set our own expectations very high, and we expect to exceed them. Again, that’s what leaders do.
"We feel good about the future. And that feels particularly good considering all of the challenges that we have faced and handled as a team.
"What do you find out about yourself and your team in times of significant challenge? Certainly the ultimate test for any team is how you respond to major challenges.
"In fact, I would call it a leading indicator of the quality of your team and its leadership capabilities.
"I have, after 30-plus years of running and helping to run businesses, concluded that what separates leaders from all their colleagues in times of challenge is courage.
"In our experience, isn’t it ultimately courage that defines our most memorable people, our most memorable teams, our most memorable decisions, our most memorable wins?
"Yet, in contemporary lists of leadership attributes, it is rarely mentioned, let alone emphasized. In my opinion this is both unfortunate and inaccurate.
"What do you learn from pressure situations? You learn that decisions must be made with relevant data, with speed, with passionate debate and, ultimately, with courage. You learn what you and your colleagues are made of.
"There’s little margin of error in challenging times.
"I would have to say that we now have proven crisis management as a core competency of our leadership team.
"The courage we’ve developed as a team will serve us all well at Goodyear in the future.
"Our leaders are not only at the top of the organization. They reside at every level of our company, and the qualities and traits of the leaders I am describing also will continue to serve our company and our community well into the future.
"Because of the strength and focus we have gained from our recent experiences, I am confident that in the near future, we will be known, once again, for what we do best. We will be known for being world class in developing, manufacturing, marketing, selling and delivering world-class products to our customers, and our financial results will reflect our market wins.
"In closing, I would like to briefly address the role of the community in support of business, not only Goodyear and our existing businesses but in encouraging other businesses and industries to make Ohio, and specifically Akron, their home.
"I’d like to point to a couple of recent examples of support provided by Akron to Goodyear.
"Last summer, Mayor (Don) Plusquellic proclaimed Aug. 6 as 'Goodyear Day' in Akron and hosted his weekly press conference at our global headquarters on East Market Street.
"Out of that acknowledgement, and Goodyear Day with the Akron Aeros (minor league baseball team), we received positive publicity, as well as positive comments in the community from those that recognize our challenges and appreciate the vitality of our people in addressing them.
"And less than two weeks ago, the Summit County Council passed a resolution encouraging governmental agencies and community residents to purchase Goodyear tires as a 'thank you' for the benefit of the company’s presence for the last 106 years.
"From that action, the Council members have promised to encourage all 88 Ohio counties to take similar action and adopt a similar resolution.
"I thank Akron for those steps. However, I would be remiss if I failed to urge all of you as community leaders to become even more innovative in your thinking.
"Think big about the future. I can promise you that we are.
"Whether I’m traveling the country talking to customers or receiving phone calls and letters of support, the common thread of the communications that I have received is that people from all over want to see Goodyear succeed.
"But I see that nowhere more than in Akron -- from friends, from neighbors and from complete strangers.
"We’re proud of Akron. We’re working very hard to make Akron proud of Goodyear.
"I will tell you that I can’t predict what the future holds. No one can.
"But I can project, based on the leadership lessons learned through facing the harshness of adversity, we are on a pathway for success at The Goodyear Tire & Rubber Co. -- and that will contribute significantly to the success of Akron, Ohio."