New Tire May Put Goodyear on Track

It's a mystery tire that's making a lot of tire dealers, analysts and investors excited -- and seems to be pushing the stock upward. Goodyear Tire & Rubber plans to launch a new high-end line of passenger tires next month with huge fanfare at its annual convention of dealers and distributors in Orlando, Fla. Some say the tire line, known as Assurance, could become Goodyear's hottest-selling new line in a decade, a move that could go a long way to helping the Akron, Ohio-based company boost its flagging sales and turn around three years of losses.

From Akron Beacon Journal

AKRON, OH — It’s a mystery tire that’s making a lot of tire dealers, analysts and investors excited — and seems to be pushing the stock upward.

Goodyear Tire & Rubber plans to launch a new high-end line of passenger tires next month with huge fanfare at its annual convention of dealers and distributors in Orlando, Fla.

Some say the tire line, known as Assurance, could become Goodyear’s hottest-selling new line in a decade, a move that could go a long way to helping the Akron, Ohio-based company boost its flagging sales and turn around three years of losses.

“In our opinion, this is (Goodyear’s) most important product launch in the last 10 years,” Saul Ludwig, analyst at McDonald Investments in Cleveland, wrote in a report Wednesday. He raised his recommendation on Goodyear shares from “underweight” to “hold.”

The Assurance line could even replace the popular Aquatred line, a wet-traction tire that Goodyear rolled out with great success in the early 1990s, he wrote.

Goodyear shares soared 12.9 percent Wednesday, closing at $10.74. That’s the first time the shares have closed above $10 in 16 months, since Sept. 23, 2002.

The stock, which has been battered for months by a steady string of negative news about restated earnings, accounting missteps and delays in stock and bond offerings, has surged in recent days. The stock has set new 52-week highs four times in the past two weeks. It is up 22 percent over the past five trading days.

The climbing stock reflects renewed investor optimism that Goodyear may be turning the corner back to profitability, after losing money in eight of the last 12 quarters. That’s after Goodyear has taken the difficult step of cutting 20,000 jobs in recent years and reaching a new contract with its largest union that allows it to make its North American plants more productive.

Now, with a new line of tires, one of the last big missing pieces may be dropping into place, some say.

Goodyear is saying little about the Assurance tires, keeping specifics about features, price and mileage tightly under wraps.

“Are we introducing a new tire? We introduce new tires all the time,” said Chuck Sinclair, senior vice president of global communications.

But in a large teaser ad running in trade publications this month, Goodyear is billing the Assurance line as an all-season tire that offers traction across a wide range of driving conditions.

“Rain will feel less wet,” the ad reads. “Ice will feel less slick. Dry roads will feel easier to handle. Rough roads will feel smoother and quieter. In fact, on February 6, 2004, it will be a new day for drivers everywhere. You have our Assurance.” The last word was followed by a trademark symbol.

The Feb. 6 date is the kickoff of the Goodyear dealer convention in Florida. Goodyear uses the annual convention to rekindle dealer support, launch new products and outline new sales strategies.

Several dealers said Wednesday they have not been able to get details about the Assurance line. However, some expressed good feelings about the roll-out. They said they believe the Assurance will be an all-season, high-mileage tire that will be popular with customers.

“I think it’s a smart move for Goodyear,” said Jerry Borodkin, co-owner of Fairfield Tire & Auto Center in Fairfield, Conn. “The company is trying to eliminate some old tire lines and come out with something exciting. They’re going to put a lot of money and effort behind it.”

“I think there’s a need for it,” said John Warder, owner of Richlonn’s Tire & Service Centers in Racine, Wis. “The competition keeps coming out with new tires with higher mileage and better wet traction. Goodyear needs to do something, too.”

Still, Goodyear has huge challenges, Ludwig wrote. The company is expected to continue cutting jobs and reorganizing its wide network of plants and offices. Raw material costs continue to rise. The company is spending less on research and capital expenses than its competitors. Its pension liabilities have climbed from $2.2 billion at the end of 2002 to an estimated $2.5 billion at the end of last year, Ludwig wrote.

Many analysts still expect Goodyear to continue posting large losses for several more quarters, but will begin posting a profit this year.

Still, dealers seem more excited about the Goodyear brand, products and customer service than they have been in years. Goodyear is shipping tires when it promises to, and is responding to dealer complaints quickly.

“They’re doing a good job,” said Ken Tolbert, owner of Farmington Tire & Auto Service in Farmington, N.M. “The Goodyear people I deal with are doing things that their predecessors talked about, but never showed any follow-through.”

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