Rich: Goodyear needs to improve its operational cost structure

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Jon Rich, president of Goodyear's North American Tire business unit, said he is not satisfied with earnings being 1.5% of sales.

"Our target is to achieve a 5% ratio of segment operating income to sales," he told attendees at last week's investor meeting in New York. It was the first investor meeting held by Goodyear in more than two years.

To do that, the company is trying to increase its volume of higher-end products, he said. Introducing new products, reducing operating costs and addressing legacy goals such as pension and health care benefits also are part of the strategy. "There is no single solution."

Improving Goodyear's operational cost structure in North America is critical, said Rich. That includes "getting our manufacturing footprint right in North America."

He mapped out a four-step approach on how Goodyear would accomplish that goal. Goodyear needs to:

1. manufacture high-margin producst "as fast as we can."

2. move the manufacturing of commondity products to low-cost plants.

3. get rid of "chronically unprofitable" products lines and customers.

4. close inefficient factories, if need be.

Each Goodyear plant has to be responsible for "a satisfactory return on investment." When asked, he declined to define what an acceptable rate of return would be.

Goodyear North American Tire is the company's largest of six business units, with more than $8 billion in annual revenues. Rich said sales are up 8% in the first half of 2005 compared to the same period last year.

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