The whole tire industry is waiting to see what happens next as Goodyear Tire & Rubber Co. integrates the Cooper Tire & Rubber Co. business into its portfolio. One thing John Healy knows is that Goodyear has found even more savings than the $165 million the tiremaker initially expected to realize.
Now, it's more like $250 million in savings are on the table.
Healy — an analyst who tracks the domestic tire industry for Northcoast Research Holdings LLC and also writes MTD’s monthly Your Marketplace column — shares an exclusive update in this latest installment of issues from 2021 that will continue to affect the industry in 2022 and beyond.
MTD: One of the biggest stories of 2021 was Goodyear Tire & Rubber Co.’s acquisition of Cooper Tire & Rubber Co.. Seven months in, can you describe how Goodyear’s integration of Cooper has gone, from your perspective?
Healy: I would agree that Goodyear’s acquisition of Cooper is among the biggest stories of the year. That said, I wish there was more for us to comment on as it relates to progress and integration. Said another way, not a lot has changed yet, in my opinion.
When Goodyear made the announcement in February 2021, the expectation was that the deal would close at some point in the second half of 2021 and the synergies associated with bringing aspects of the two businesses together would yield Goodyear savings of $165 million, mostly associated with the reduction in overlapping corporate functions and realizing operating efficiencies. Since then, the tire business — from a demand standpoint — has picked up a notch and raw material costs have escalated, while shipping issues have become widespread.
Simply put, things have gotten more complicated.
Goodyear closed on the acquisition of Cooper in June, admittedly a few months faster than we would have expected. Since then, though, it has been quiet on integration developments.
However, Goodyear has provided the investment community with an updated view of Cooper synergy potential. The company now expects that it will achieve savings of closer to $250 million over the next few years as it incorporates some streamlining of sales and manufacturing efforts.
As noted, we have not seen a lot of change from Cooper since its acquisition by Goodyear.
We think the reason for it is that the Cooper business is performing well, with the Cooper brand gaining share in the industry and Goodyear not wanting to fix what isn’t broken.
We think Goodyear has elected to take a slow approach with integration and changing things at Cooper in order to not create more stress in its own processes, as well as in the processes of the dealer community
We believe a big part of Goodyear acquiring Cooper is to reimage and position the company in the mid-tier market, with a good brand and strong product lineup.
We do think that as we move throughout 2022, we will see changes in terms of sales efforts and channel emphasis.
We would expect Goodyear to do some redrawing of the map in terms of product availability and likely introduce Cooper into its TireHub operations. We would look for changes in distribution and sales efforts as Goodyear moves through the year and potentially more long-term manufacturing/brand decisions to be items that play out in 2023.
MTD: Do you think Goodyear will have room within its distribution base for Cooper dealers? Why or why not? Does this create opportunities for other tire suppliers?
Healy: Our short answer is yes. We think Goodyear acquired Cooper because Cooper was doing things right, including having a brand in the mid-tier of the market that was gaining share and viewed highly by consumers and the dealer community. We believe a big part of Cooper’s success was tied to the strong relationships it had with local and regional dealers. From our perspective, many of these dealers have been share gainers in recent years as they have offered the consumer a good product and quality service at a reasonable price point. We see this winning formula as being timeless and believe that it will continue to be a winning combination long into the future.
Given this, we see the Cooper network of dealers as being an incredibly valuable asset to Goodyear. We don’t see a lot of reasons why Goodyear would want to change what has worked so well in recent years. From a volume standpoint, Cooper has been a share winner more than a loser in recent years and this traction Cooper had in the market is a big part of the reason Goodyear spent $2.8 billion to acquire the company.
Will there be some changes around the edges and in some markets? My guess is yes, but at a high level we see Goodyear keeping Cooper dealers in the fold.
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