Will Sumitomo build Falken tires in Buffalo?

June 4, 2015

Sumitomo Rubber Industries Ltd. (SRI) and Goodyear Tire & Rubber Co. have agreed to dissolve their joint ventures. What does Sumitomo have to say about the decision?

Goodyear's response to the dissolution ("Goodyear and Sumitomo dissolve alliance") was more financial than strategic. The resolution of the alliance increases the company's "flexibility to grow profitably as we continue to focus on delivering strong performance and sustainable economic value," said Chairman and CEO Richard Kramer.

In addition, Goodyear said it will pay Sumitomo $271 million upon closing of the transaction for an undisclosed reason, but was quick to add the quarter-of-a-billion-dollar payment will not impact financial targets because it was accounted for under the company's capital allocation plan.

Sumitomo focused on its brand marketing plans. And that centers around the purchase of its first manufacturing facility in North America in 16 years.

As part of the dissolution, Sumitomo will purchase the Goodyear consumer, commercial and motorcycle tire plant in Buffalo, N.Y.

Except for Dunlop motorcycle tires, Goodyear will retain exclusive rights to sell Dunlop-brand replacement tires in the United States, Canada and Mexico (as well as to non-Japanese vehicle manufacturers in those countries). Any Dunlop passenger, light truck and truck tires Sumitomo manufactures in Buffalo would have to be exported.

Sumitomo's main lines globally are Falken and Dunlop. So producing Falken brand tires in Buffalo is a distinct and logical possibility. Sumitomo says its overall strategy is to "accelerate global operations by addressing customers' various needs using Dunlop and Falken brands."

Rights to the Sumitomo brand, among others, are owned by Sumitomo Corp., and controlled in the U.S. by Sumitomo Corp. of America (SCOA), a fully integrated trading and investment enterprise wholly owned by Sumitomo Corp.

Read more of MTD's coverage:

Sumitomo/Goodyear: Performance was an issue