Goodyear-Sumitomo Alliance

Topics: Goodyear Tire and Rubber Company, Bridgestone, Tire manufacturers Pages: 4 (1031 words) Published: February 28, 2011

Goodyear was the leading tire manufacturer till the late 1980s after which Groupe Michelin and Bridgestone Corp toppled Goodyear from its number one market position. Samir Gibara of Goodyear wanted to regain the top spot by increasing the annual revenues by at least 50% and that would be possible only through the acquisition of another company. Sumitomo Rubber Industries Ltd of Japan seemed to be a good strategic acquisition for Goodyear because of its Dunlop brand and manufacturing facilities in Japan – a market that Goodyear was looking to aggressively enter into. In this paper, we analyze the Goodyear – Sumitomo alliance by broadly discussing about the creation process, rationale behind the alliance and cultural integration challenges. We will also briefly describe about the Goodyear – Michelin alliance for manufacturing run-flat tires. Strategic Rationale

The combination supports both companies’ strategic objectives for growth and cost leadership. Through this alliance, Goodyear will get entry into the Japanese market with the help of Sumitomo and its subsidiaries (Dunlop, OHTSU). At the same time, Sumitomo would get entry into the North America and Europe markets through Goodyear’s distribution network. As a result of this collaboration, both will be able to compete more effectively in the global markets, offer enhanced branded products and generate benefits for customers, shareholders, associates and suppliers. Further, the top line of both the companies is expected to grow from the new products and distribution through this alliance. In addition, cost improvement and rationalization will add a combined estimated $300-$360 million to the operating profits of the joint ventures during the next three years.

Creation Process
Goodyear and SRI will form four joint venture operating companies and two synergy focused support ventures. Goodyear agreed to pay $936 million to SRI. Goodyear would also acquire 10%...
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