AKRON, OH - Shares of Goodyear Tire & Rubber Co. (NASDAQ: GT) rose 2.4% today after the company unveiled a comprehensive transformation plan and announced the upcoming retirement of CEO Richard J. Kramer in 2024. The strategic initiative, dubbed "Goodyear Forward," is set to optimize the company's portfolio and is expected to generate significant financial benefits by 2025.
In a move prompted by Elliott Investment Management following a review for value maximization, Goodyear has decided to revamp its chemical business, the Dunlop brand, and its specialty tire business. As part of the agreement with Elliott, three new directors have joined Goodyear's board. The company's stock price is anticipated to reach $32 amidst these changes.
Kramer highlighted the necessity for transformation, citing increased fixed costs post-COVID-19, higher wages and energy expenses, and a shift in the automotive industry towards electric vehicles.
Looking ahead, Goodyear's "Goodyear Forward" strategy aims to raise over $2 billion from portfolio optimization and expects to realize $1.3 billion in benefits by the end of 2025. This includes ambitious cost reductions amounting to $1 billion and actions that are projected to deliver an annual run-rate benefit of $300 million. The tire manufacturer also plans to double its operating income margin to 10% by the close of 2025 and targets a net leverage ratio of between 2.0 and 2.5 times.
Despite facing a third-quarter loss of $89 million, Goodyear has experienced a decrease in raw materials costs which contributed positively to its bottom line. The stock has seen a substantial increase of 37% year to date.
The engagement of a firm to search for Kramer's successor marks the beginning of a new chapter for Goodyear as it navigates through industry challenges and pursues profitability through strategic restructuring and management changes.
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