Month-by-month analysis: ´Symbol of a new Goodyear:´ Was the launch of Assurance back in February a resounding success or a lot of hot air? Here´s a hint: Goodyear recently turned its first quarterly

Nov. 1, 2004

Twenty years from now, a group of Goodyear Tire & Rubber Co. retirees, perhaps sitting around a local Akron, Ohio, eatery over breakfast, will talk about how the Assurance tire line saved the company in 2004.

A teenager sitting in the booth next to them might chalk up their hyperbole to nostalgia at best, or memory loss at worst. But their assessment of the importance of Assurance may not be so farfetched.

Prior to the launch, Goodyear was reeling from three consecutive years of net losses in the hundreds of millions of dollars -- with a record loss of $1.1 billion in 2002. Its North American Tire operations were under-performing. Its stock price had dropped from $63.62 on Dec. 31, 1997, to $7.86 at the end of 2003.

A new three-year labor contract with the United Steelworkers of America was in place, but the burden of debt refinancing, pension funding and other cash obligations were making analysts wary.

The company needed something that it could rally around, that could personify a financial comeback.

It needed an unqualified success. It needed Assurance.


February -- the beginning

At the 2004 Goodyear Dealer Meeting in Kissimmee, Fla., in February, Goodyear launched two Assurance premium broad-line tire lines with much fanfare. The ComforTred was designed for the more specialized luxury car segment, while the TripleTred was engineered to be more of a premium all-season tire.

Jon Rich, president of Goodyear Tire North America, flat out told attendees that Assurance TripleTred was "the best performing broad market tire Goodyear ever made."

Same old, same old? Independent dealers were excited but not over-hyped about the introduction. However, the $50 million-plus advertising campaign supporting the introduction was well received.

"It´s a niche of the market that Goodyear hasn´t been participating in," said attendee John Perschbacher, general manager of Premier Tire Terminal, a wholesaler in Denver, Co. "They haven´t had a premium-grade tire. The Infinitred came out five or seven years ago, but fizzled rather rapidly. And they had nothing to fill the void."

When asked, "What did you think of the Assurance tire introduction?" dealers attending the show seemed caught up in the hype publicly. Privately, they were cautiously optimistic (as one dealer said, given the pomp and circumstance, "It better work for them.")

1. Matt Jensen, president, Jensen Tire, Omaha, Neb. (80% retail, 20% wholesale): "I think it´s going to be great, especially in our area with the TripleTred. And they are placing the power of advertising behind it. We´re really looking forward to it."

2. Henry Ginsberg, owner, City Tire, Miami, Fla. (80% retail, 20% wholesale): "I love it. I´m very, very excited about the launch of this tire. I was the first order in south Florida from our WD. I think this is the largest launch since the Aquatred. I´m ready to get merchandise and see what the tires can do."

3. Mike Bastian, president, Bastian Tire Sales, Willamsport, Pa. (60% retail, 40% wholesale): "I think it was a good launch. I think the dealers stepped to the plate and ordered. They don´t have all the sizes yet, but we do have inventory on them."

4. Craig Arch, owner, Arch Automotive, Georgetown, Cayman Islands (50% retail, 25% commercial, 25% wholesale): "It´s probably one of the best introductions since I´ve been a Goodyear dealer (he started selling Goodyear in 1986). We ordered immediately for the United States stores (he also has six Bay Area Tire & Service Centers in the Baltimore area). We´ll order them even for (the Cayman Islands) -- I´ll have to mark out the "ice" (on the TripleTred advertising) and put something else there, maybe coconut juice! It´s the first time in a while the tire has looked significantly different. The look of the TripleTred is sellable. They look cool.

"Before, some of the products didn´t transcend the warmer climate. Here, it (TripleTred) has enough unique features that we can sell it."

5. Steve Hartung, general manager, tire division, Trader Ray Tire Center, Detroit, Mich. (95% commercial, 2.5% retail, 2.5% wholesale): "I like the TripleTred. I´m in the heart of Detroit. I don´t get Caddys, the expensive cars down here. I think it will sell. And we have a lot of businesses in the area. I ordered some TripleTreds, but I don´t think I can sell the ComforTred in downtown Detroit."

6. Jeff Chapman, general manager, Freedom Tire, Des Moines, Iowa: "I was pretty impressed with it. I was most impressed with the fact that Jon Rich is kind of a scientist, and he personally oversaw what was going on. He (and other executives) personally tested the tires. The upper management seems to be hands-on in terms of research and development... they are guaranteeing the product and then they will go to market with it.... Hopefully we´ll have the product out for the spring selling season."

Glenn Lefurgy, owner of Tireman´s Tire Shop in Mahopac, N.Y., summed up the feeling of many of the dealers in attendance: "I like the ideas. I haven´t gotten tires yet, but I´m itching to get going. I like things like this. It´s pretty exciting for the tire business, and when you´ve been in the business for 30 years sometimes it gets boring. I´m betting a lot of money that it´s successful."

He wasn´t too impressed with the commercials, however. "I do my own commercials for cable. I´ve pretty much storyboarded it." Lefurgy´s ads will feature longtime friend and former professional wrestler Captain Lou Albano.


March/April -- make it so

Goodyear originally had announced plans to produce the tires at its Lawton, Okla., facility -- the company´s only non-union plant in the United States. But when the United Steelworkers of America (USWA) claimed job security provisions in its labor contract with Goodyear called for producing the tires in union facilities, a compromise became necessary.

Goodyear resolved the dispute by committing to manufacturing a significant percentage of Assurance tires in USWA facilities, including the Gadsden, Ala., and Tyler, Texas, consumer tire plants.

Assurance ComforTreds began shipping in early March. Assurance TripleTred shipments followed in the middle of April.

"The guys in the store are telling us it´s selling itself," said Ron Meredeith, executive vice president of Lamb´s Tire & Automotive Centers in Austin, Texas. "We´ve got ComforTred, because TripleTred isn´t in our stores, and that´s before the promotions. We got our order in at the show. That´s why we´ve got them in the stores."

Although he wouldn´t reveal specific sales numbers, a Goodyear spokesman did describe initial customer response to the new Assurance lines as "fantastic."

"Orders have surpassed expectations and, in fact, we have already taken steps to increase capacity, and additional molds will be arriving at the manufacturing plants during the first week of April.

"Even before the Assurance advertising campaign hits the airwaves in late April, retailers are reporting that the comprehensive Assurance training program is excellent and that retail sales are starting off strong," he added.

Goodyear´s 30-second Assurance television spots debuted on April 26, voiced by actor Patrick Steward, best known for his role as Captain Jean-Luc Picard in Star Trek: The Next Generation. The nationwide ads marked the beginning of, to use Goodyear´s words, "one of the most intensive media campaigns in (Goodyear) history."

Chuck Sinclair, Goodyear´s senior vice president of global communications, said the demand for Assurance was triple what the company anticipated. "Now we´ll have to see if the sell-out is the same as the sell-in."


May -- Chicago, Chicago

On the company plane to Chicago for the first of 13 "Goodyear State of Assurance" dealer ride-and-drives across the country, Rich said training was one of the secrets of Assurance´s sales success. "We did more dealer training with this launch than we´ve ever done."

Rich said Goodyear originally thought sales would favor TripleTred three to one. Certainly the early availability of the ComforTred affected that ratio. Rich said when both tires are available, there won´t be that much of a gap.

A number of tire dealers volunteered to help man the event. They also confirmed there was a lot of buzz surrounding both Assurance tire lines -- even though TripleTred shipments had just started.

"People have noticed the ComforTred difference," said Gary De Re, president of De Re Tire & Auto Inc. in Oak Forest, Ill. He had just started getting the TripleTred, but was waiting on size P225/60R16. The same size in the ComforTred had sold out right away.

Terry Folta, co-owner with sister Tammy Ruke of T.R.L. Tire Service in South Chicago Heights, Ill., said he, too, was trying to get more sets of TripleTreds. "We´ve received lots of inquiries, especially more on the TripleTred."

"I´ve sold three sets of ComforTreds myself, and I had two come back to say they loved them," said Gail Wynn, a salesperson for Levin Tire in Highland, Ind.

Jim Fagan, general manager for Roadmaster Tire Auto Centers in Naperville, Ill., said the tires were selling very well. "It seems the older people like the ComforTred.

"We just need to get more tires," he added.

One retailer, while extolling the virtues of the tires, complained about supply. "It´s a shame they gave it to the wholesalers," he said.

Barry Levin, owner of the 12-store Levin Tire chain based in Highland, Ind., said his ComforTred sales were good. "It´s nice to have a product you can sell, and they come back and say what a great product it is." He said one of his workers received a hug from the owner of a new set of ComforTreds.

In Levin Tire´s four-color newspaper ad in the Sunday, May 16, edition of The (Hammond, Ind.) Times, two nationwide Assurance promotions were emphasized. Customers could receive a $60 mail-in rebate on a set of Assurance tires until June 5 (Rich called it part of a "rolling national promotion"). They also could receive an instant $45 rebate on set of Assurance tires.


June/July -- financial respect

"We´re beginning to execute well in North America. Our new products are having a major impact in our markets," said Chairman, CEO and President Bob Keegan during his June 21 investor relations conference call.

Goodyear had just announced its first-quarter results, which showed signs that the company was on its way to profitability despite a $76.9 million loss.

That trend continued when the second-quarter results were released.

* After six consecutive quarters of net losses, Goodyear posted net income of $25.1 billion.

* Sales of $4.5 billion were a record -- surpassing the previous mark of $4.3 billion set during the first quarter.

* Unit volume totaled 55 million, up 6% compared to the second quarter of 2003. Unit volume also was up 6% in the first quarter.

In North America, as Assurance was being heavily marketed and the Aquatred 3 was being phased out, Goodyear recorded unit volume of 25.7 million in the second quarter, a 1.6% increase vs. the same period the previous year.

"Demand (for Assurance) is more than three times our initial expectations," said Keegan.


August -- six months later

"There´s a buzz in the market today that is far exceeding our expectations," said Keegan. New sizes are being added "as quickly as we can to meet demand."

The Assurance promotion of the month was a $50 cash card for buying a set of Assurance tires. However, the company also was getting ready to start its fall ad campaign touting the all-season characteristics of the TripleTred.

Drew Dawson, co-owner of Tire Source, was not only satisfied with his ComforTred and TripleTred supply, but also confident that adequate supply would continue unabated.

"(Sales for) both are doing great," he said. "They´ve added a bunch of molds." Tire Source is a six-store independent chain based in northeast Ohio.

Six months after it was introduced, MTD revisited the dealers who spoke optimistically about the launch in February, prior to any nationwide advertising. We asked them if their original impressions and expectations surrounding Assurance had panned out.

1. Matt Jensen, Jensen Tire: "It´s a great product. It´s one of the few products we´ve ever had where the customer comes in and asks for it. Goodyear did it well, too. There´s a lot of advertising, spiffs for the salespeople, training, and then the rebates for our customers. It´s nice that when customers ride on the tires they come back or call and let us know how well they like them. Goodyear really hit a grand slam on this one.

"Fortunately, we bought enough of them in Las Vegas. (Supply) is tight, but we´ve had enough stock (of both) to pull us through. We bought a pretty good supply. Although we´ve been re-ordering them and not getting them as quickly as we´d like, we have enough supply to get by. (Dealers) who sell out before they (re-order) may run into some problems -- it´s about 45 to 60 days before we see the product.

"When you hit a home run like this, everyone feels good, especially the dealers. And it´s been awhile. The product launch was important, too. One of the best launches I´ve ever been associated with."

2. Henry Ginsberg, City Tire: "It is a quality product, through and through. They´ve done everything that they could possibly do to produce a premium tire. And they are willing to back it up with their 30-day ride guarantee and 80,000-mile tread wear warranty.

"They´ve had different promotions... Goodyear has done a good job of merchandising the tire. The pricing on the tire has been very competitive and it has allowed us to sell the tire at very competitive prices in our market.

"Supply has been good for both tires. I would say we´re selling more ComforTreds than the TripleTreds. I think the type of cars we´re putting the tires on -- luxury cars, full-size cars -- are buying the ComforTred."

3. Mike Bastian, Bastian Tire Sales: "Good tire, easy to sell. Supply is not there, mostly in the TripleTred. It´s a certain clientele you´re hitting. (It´s not for) everyone who walks in the door.

"Overall, Goodyear has done a super marketing job, and it´s a good tire. I think it´s helped them."


4. Craig Arch, Arch Automotive: "We haven´t gotten ours yet, not in the Caribbean. So I can´t tell you if they are real easy to sell or not. I have my first tires coming within the next week or two."

Arch suggested we talk with Maryann Pettie, general manager of Arch´s six stores in the states, so we did. "They are awesome. They are doing fantastic," she said. "Actually, I even have a two-page, written letter from one of our chronic complaining customers. He took the 30-day ride guarantee. Two weeks into it, he wanted to try (a competitor). He liked Assurance better. One week later, he wrote us a letter saying that it solved his back problem, that it´s the best tire ever. He just raves about them. And he´s a tough cookie.

"A lot of the sales we´re getting by word-of-mouth. The sales of both are going really well. We´re getting more referrals on the ComforTred with the ride. We haven´t had all the sizes with the TripleTred, so we haven´t been able to do an apples-to-apples comparison. But now we´re selling both about the same. Supply had been a problem. But we´re starting to see that improve. And as we get the sizes in we need, we´re not having any problem moving them."

5. Steve Hartung, Trader Ray Tire Center: "My impressions are the same (as they were at the Goodyear dealer meeting). It´s still a good tire, a good everything.

"For my neighborhood, I don´t think it´s a fit. I´m in downtown Detroit proper. I get a ton of old cars down here. We have bought some through Capitol Tire. We´ve sold some ComforTreds. On occasion I get the Cadillac or Lincoln."

6. Jeff Chapman, Freedom Tire: "I think from the responses we get from the customers, it´s probably the best tire Goodyear´s ever made, probably the best tire out there. I think their marketing efforts are good.

"We don´t have enough to sell. I think Goodyear is overselling, which is a good position for them to be in. But when somebody´s ready to buy, they´re going to buy. So that part´s been difficult -- when somebody wants to buy and we can´t deliver to them."

Goodyear´s advertising and marketing "are impressive," he added.

There was one complaint, however. The tire, which is initially being sold only through Goodyear independent tire dealers and company-owned stores, is available over the Internet, according to Jensen.

"When they first came out, you could make a decent margin on it. Now Wal-Mart is selling it on-line."

A Goodyear spokesman said Assurance tires were not being sold directly through any channel other than the tire dealer channel. But he admitted that Sears and Wal-Mart could get any tire by special order.

"We don´t have a supply agreement with Wal-Mart in which Wal-Mart stocks Assurance tires."

Wal-Mart, thanks to its ability to special order, does sell Assurance tires on-line. It´s most recent pricing for a size P215/70R15 TripleTred is $97.26 each; a ComforTred in the same size sells for $84.21.


Conclusion -- a culture is reborn

In his speech at the recent International Tire Exhibition and Conference (ITEC) in Akron, Ohio, Sam Landers, R&D Fellow and a member of Goodyear´s Future Technology Development Team, said there are several unexpected benefits that have come out of the success of Assurance.

"Innovations were created not only in the product, but also in the design tools and techniques that supported the innovation," he said. "These process innovations are now available to benefit many other future products.

"The project was also a catalyst for accelerated innovations in the materials and manufacturing areas. Even the way we used market research and how teams worked together will definitely influence all our future projects.

"It has also been very exciting to see how this special project accelerated the rate of change throughout Goodyear, but we know that it has only raised the bar for the next big thing."

Rich, too, sees Assurance as more than the sum of its parts. When asked, "What has Assurance meant to Goodyear?" he looked at the big picture before answering.

"An easy answer could be given in terms of volume or sales, and Assurance certainly has meant a lot to the company in those areas," he said. "But I look at it from a much larger perspective, more in terms of how Assurance is a symbol of a ´new´ Goodyear.

"First, its development was driven by the market -- what vehicle owners wanted -- as opposed to manufacturing or engineering. Second, it went from concept to market in about 13 months instead of the 24 months or more that was our usual time frame.

"Third, the need for a fast production cycle forced our engineers, researchers, marketing and testing people to work in parallel, rather than in sequence. Everybody was in the same room from the beginning. And, fourth, we delivered complete support for Assurance, from marketing and advertising to dealer training.

"All of this was a departure from the way Goodyear had traditionally launched new products," said Rich. "Now, of course it helps that these are great tires. But the birth of Assurance showed everyone that we could bring products to market faster, with better technology and with tremendous support. That´s the way we´ve got to run our business."


One name, two tires: Assurance refers to both ComforTred and TripleTred

"This is a great day for Goodyear," said Jon Rich, president of Goodyear Tire & Rubber Co.´s North American Tire operations, at the introduction of the Assurance broad-line tire line in February. Assurance "is the most important product from Goodyear since the Aquatred."

Assurance is actually a family of premium, all-season tires. Both tires are named Assurance. One tire features "ComforTred" technology and is geared to possible original equipment fitments. The other features "TripleTred" technology" and its more aggressive, unidirectional tread pattern.

Based on its consumer research, Goodyear designed the tires with safety and comfort in mind. The two Assurance tires are:

1. ComforTred. Designed for luxury cars, it has a rubber "comfort layer" that gives the tire 20% more cushion between the tread and the belt. Its tread pattern has densely packed tread blocks, a decoupling groove on both sides, and angled blades and grooves "specifically designed so they gradually enter the footprint to minimize noise," said Dave Griffin, senior development engineer, at the tire´s launch.

The tire features a feather icon on the sidewall.

The ComforTred line was introduced in 20 sizes, three of them H-rated, covering 94% of the luxury car segment. It is priced at a premium, roughly 20% more than similar Goodyear tires. (Goodyear said the ComforTred would be priced anywhere from $83 to $137.)

2. TripleTred. Three unique compounds split the tread into three "zones," one for wet performance, one for dry and one for ice. The all-season tire line initially will be launched in 13 sizes, with more added during the summer.

The TripleTred´s sidewall is decorated with an icon featuring the sun, three raindrops and a snowflake.

The TripleTred is also a premium-priced tire. Goodyear is selling it for 5% to 8% higher than the Assurance featuring ComforTred.

Assurance is the flagship brand for Goodyear´s passenger tire lines. The other three flagship brands in Goodyear´s four-segment approach to consumer tire marketing are Eagle (high performance tires), Fortera (SUV tires) and Wrangler (light truck tires).

The tires share 80,000-mile limited tread wear warranties and Goodyear´s Permablack compounding, which prevents discoloring due to ozone damage.

In addition to the tread wear warranty, the tires are backed by a 30-day satisfaction guarantee; a Roadside Assistance Program (the Dunlop D65 Touring tire has a similar program); a nationwide warranty service; and a tire rotation reminder service.

Goodyear doesn´t try to hide that it is marketing the Assurance ComforTred and TripleTred directly against the Michelin Symmetry and HydroEdge, respectively.