An investment group that says it represents 10% of Goodyear Tire & Rubber Co.'s "economic interest" is calling for some major changes.
Elliott Investment Management LP sent a letter and presentation to Goodyear's board of directors on May 11 with the goal of outlining "the right path forward to create value at Goodyear and realize its full potential," according to a press release that Elliott distributed on the same day.
The group is calling for the addition of "five new highly qualified independent directors" to Goodyear's board in order "to improve governance, bring about a cultural change and help restore confidence among investors; monetizing "the trapped value of Goodyear's retail platform," which Elliott believes is "nearly worth Goodyear's market capitalization;" and forming an operational review committee "to develop an operational and margin improvement plan."
In its letter to Goodyear's board, Elliott called these initiatives "critical steps."
Elliott said "is one of Goodyear's largest investors because it has strong conviction in the significant value-creation opportunity achievable at the company.
"Despite the company's strong brand, leading market share and favorable industry tailwinds, Goodyear's stock has meaningfully and consistently underperformed.
"The company's poor stock performance is a direct result of its significant margin erosion, suboptimal go-to-market strategy and unfocused brand strategy, which have collectively led to a loss of investor confidence.
Click here to access Elliott's full letter and presentation.
Goodyear issued the following statement in response:
“We value input from our shareholders and regularly engage with them. We are reviewing Elliott’s recommendations, and we intend to meet with them to discuss their views in more detail. Goodyear’s Board and management team have a strong track record of making value-enhancing strategic decisions on behalf of shareholders. We regularly review the company’s strategic plan to ensure that Goodyear is best positioned to deliver strong, sustainable shareholder value. As part of our Strategy Roadmap, Goodyear continues to strengthen our leadership position in the global tire industry as we advance our connected business model and innovate for the future of mobility.”