While Michelin and Bridgestone tend to always battle it out globally for mining’s big 57 in and 63 in radial tyre contracts with the Tier 1 miners – Goodyear, headquartered in Akron, Ohio, has always been the third player in the premium market, often able to step in with sizeable radial allocations for mid-tier miners, contractors and smaller miners – as well as acting as an important strategic third player for the Tier 1 miners. Goodyear is also a popular supplier of underground tyres in various parts of the world.But this is set to change as the company has announced it intends to divest the business, along with its Chemicals business and its Dunlop brand.
The divestment is part of what it is calling the Goodyear Forward plan to “optimise its portfolio, deliver significant margin expansion and reduce leverage to drive sustainable and substantial shareholder value creation.” The plan “follows a comprehensive evaluation by the Strategic and Operational Review Committee of the Board of Directors to evaluate all strategic, operational and financial opportunities to maximise value.” Basically, Goodyear has decided to focus squarely on its leading retail tyre business, and in North America in particular.
In the webcast, CFO Christina Zamarro stated: “The third business is our off the road equipment tyre business, which provides specialised tyres for the mining and construction industries, and typically returns SOI margins in the mid teens. While the technology for this business is closer to our core tyre business, we lack the scale of our larger competitors, who are each four to five times larger in terms of revenue. The amount of capital it would take for us to achieve competitive scale is significant and unlikely to be achievable in the foreseeable future. As a result we have decided to look at opportunities to potentially monetise this business as well.”
With the sale of its Chemicals business, Dunlop brand and OTR business, Goodyear is looking at potential proceeds in excess of US$2 billion. The OTR business has annual revenues of about US$700 million and the presentation said the main SOI impact of this would be in Asia. The process to divest the three businesses is apparently well underway. Goodyear produces mining tyres not only at its main base in Akron, but also at a range of other global locations, which represent a possibility for acquisition along with the tyre designs and technology themselves. These locations are Colmar-Berg in Luxembourg; Nippon Giant Tire in Tatsuno, Japan; Topeka, Kansas; Americana, Brazil; Cali, Colombia; Bogor, Indonesia; Kuala Lumpur, Malaysia; and Karienga, South Africa. The complication is that most of these sites do not only produce OTR tyres but commercial tyres as well.
As Michelin and Bridgestone are already well established, potential suitors for these assets and the mining tyre IP are most likely to be already tyre majors but with limited market share to date in mining or in large radials – as it is a very hard market to compete in due to the investment and depth of technological capability needed. This could include companies like Yokohama or Continental or indeed Asian players like India’s BKT or one of the major Chinese players which include companies like Techking.
