Viewpoint -- A Fork In The Road For Goodyear

Dec. 21, 2004
Can the tire giant take on Dana in the modular components market?

Goodyear Tire & Rubber Co. made itself the biggest fish in the pond in 1999 through a joint venture with Japan's Sumitomo Rubber Ltd., and now the world's leading tire maker is looking for a bigger pond. Goodyear is thinking about using tires as a platform from which to leap into making modular components for cars. Goodyear has telegraphed its intentions to move into car part manufacturing through statements made by several executives who have indicated the company could become involved in an automotive joint venture. Analysts are betting the likely partner would be TRW Inc., and that the two companies would dilute the risks involved in such a venture by combining their investments and technologies. Such a joint venture could combine products from TRW's chassis systems, commercial steering systems, and steering wheel systems with Goodyear's tire and wheel technologies to deliver directly to automakers' assembly lines a rolling module on which the rest of the car can be built. Dana Corp. already is well ahead of its competitors in developing and supplying similar modules, and automakers are beating the bushes for a strong competitor to Dana. A Goodyear/TRW joint venture would go one step beyond Dana's products, especially with the new technology that Goodyear added to its gun belt recently. In a global compact, Goodyear and its archrival, Michelin Groupe, announced they would form a joint venture to develop run-flat tire technology, and that new product offerings for run-flat tires would be based on Michelin's PAX systems. Those systems have a unique design that requires automakers to move away from the classic wheels that have been in common use for more than 50 years, to a new style of wheel. The implication in the Goodyear/Michelin pact is that any tire maker who is not licensed by these companies is going to be out of the competition in coming years. With this new tire and wheel technology, a Goodyear/TRW joint venture would be shrewdly poised to provide premium undercarriage products to any carmaker in the world. In its 102 years of business, Goodyear always has been primarily a tire maker, but the company also has made a huge variety of other rubber products, steel and aluminum tire rims, blimps and rigid airships, satellites, airplane parts and components, including parts for such planes as the B-29 bomber used in World War II and the Boeing 747, and, during WWII, Goodyear manufactured Corsair Fighters, guns and ammunition. Diversified manufacturing is not foreign territory for Goodyear. Further, Samir G. Gibara, chairman, president and chief executive officer of Goodyear, has proven to be a daring visionary. Whether the forging of the $1 billion alliance with Sumitomo Rubber Ltd. in 1999 that made Goodyear, again in its history, the largest tire producer in the world, or in fashioning the joint venture with Michelin that is designed to share and distribute vital tire technology while crowding out Bridgestone, Goodyear's and Michelin's hated rival, Gibara has demonstrated an astute and admirable business sense. The tire industry is mature, and Goodyear's stature in it is as big as it gets. It appears now that Gibara's plan is to break out of that small pond, and join bigger beasts in a hungrier market in which Goodyear can grow in new directions.

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