Goodyear addresses online sales, pricing and more during conference call

Bob Ulrich
Posted on July 29, 2015

Although Goodyear Tire & Rubber Co. is moving full-speed ahead with its "value proposition" strategy, there are still headwinds with which to be dealt. That especially applies to Latin America -- and the winter tire selling season in Europe.

Company executives revealed what dealers can expect from Goodyear during their July 29 conference call following very positive 2015 second-quarter financial results. I listened in, and five topics piqued my curiosity.

1. The market seems to be happy with Goodyear's pricing. Except for a recent price increase in Europe -- made necessary by the weakening Euro in relation to the U.S. dollar -- Goodyear has not announced any across-the-board price increases. Also, its price mix has remained stable while raw material costs have gone down. In the United States and Canada, Goodyear actually had a positive price mix to the tune of $17 million. The result? Goodyear has been able to keep the money saved in raw material costs because dealers and consumers are happy with Goodyear's pricing.

2. The roll-out of its online sales strategy continues. Chairman and CEO Rich Kramer said the e-commerce strategy has "met or exceeded our expectations."(When asked by MTD what that meant in terms of actual sales, Goodyear declined to comment.) As the roll-out, which began in Chicago and has migrated west and east to Minneapolis and Philadelphia, continues, Goodyear says the process will become more efficient, making the tire-buying process easier for the consumer.

Kramer said more than 4,000 Goodyear retailers are signed up for the program. The number of dealers participating in the program has increased more than 50% since it was announced at the Goodyear Dealer Conference in late January. At the time, the company admitted the number of consumers buying online was very small, but that the online platform showed growth potential.

During the conference call, Kramer insisted selling tires online "will drive profitability through the value chain."

3. The Kelly Edge does not fill the gap created by tariffs on Chinese consumer tires. Neither does the Goodyear produced Douglas powerline. They are both marketed in the mid-tier segment, specifically the "commuter touring" segment, the single largest part of the market, according to Kramer. As such, the Kelly and Douglas brands are not competing directly with low-cost radials. Goodyear says sales of the new Kelly Edge powerline also are "exceeding expectations."

4. Don't cry for me, Argentina. Second-quarter tire unit sales, dollar sales, segment operating income and segment operating margin in Latin America were down compared to 2014. The prognosis for the rest of the year also had a negative tone.

For example, vehicle production in Brazil is down significantly this year, so Goodyear's OE sales there are down. Also, the devaluation of the real in Brazil makes business in that country volatile. The status of Venezuala's economy is also unstable.

However, there were positive results in Mexico and Argentina. And the devaluation of the real is expected to limit tire imports, which, no doubt, will increase Goodyear's market share there. (Goodyear has a tire manufacturing plant in Brazil.)

5. It's not a nice day for a "white winter." The Billy Idol reference to "White Wedding" aside, Goodyear says it is not counting on a "white" or harsh winter in Europe. Why? Chairman and CEO Rich Kramer listed three reasons: 1) warmer-than-usual winter weather in the last three years; 2) high winter tire inventories; and 3) the wait-and-see approach being taken by dealers. The weather is just too "unpredictable" to look too far ahead. As a result, Goodyear is taking a more "measured approach" to winter tire production in Europe than it is in the U.S.

To read a transcript of the conference call, click here. A taped replay is available on the Goodyear website.

Related Topics: Kelly Edge, Latin America, Low-cost radials, online tire sales, raw material costs, Richard Kramer, tire prices, winter tires

Bob Ulrich Editor
Comments ( 2 )
  • See all comments
  • William

     | about 4 years ago

    Marcus, I feel the pain. I have been a Michelin AAD since the inception. Not telling you what you do not or what you maybe realizing . The Tier 2 tire companies are looking better every day, Ultimate slap in the face. This should infuriate any independent tire dealer. Wake up America !!! http://www.moderntiredealer.com/channel/retailing/news/story/2015/08/michelin-pilot-program-sells-tires-online-and-offers-concierge-service.aspx

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