Goodyear strives to make run-flats standard

Automotive News

New York - Goodyear Tire & Rubber Co. hopes to get US automakers to adopt run-flat tyres as original equipment. This is part of its strategy for profitable growth over the next decade, said CEO Robert Keegan in an interview last month.

"The BMWs, Mercedes and Audis of the world have adopted run-on-flat technology as the standard," Keegan said after an investor meeting. "I am promoting, cajoling and trying to push the decision makers in Detroit in that direction."

Run-flat tyres have been available on the Chevrolet Corvette since 1994, but the move toward run-flat tyres has moved much more quickly in Europe, he said.

"The consumer need and instinct for run-flat tyres is there," Keegan said. "It is very difficult to drive the run-flat programme through the replacement market first. Our perspective is that it has to be run through the OEs."

Cost-cutting plan

On Sept. 23 Goodyear unveiled three years of cost-cutting plans to investors. It is a continuation of reductions started two years ago that have included plant closings and sales of noncore assets.

"Run-flats are a key part of the strategy for the next decade," Keegan said. "We believe we have a technology and a current product line that consumers would love to have. What's the number one anxiety point, having a flat or a blowout?"

The tyres come at a premium of about 15 to 20 percent over other tyres as original equipment on European models, Goodyear said.

Run-flat tyres do not actually run flat. Strengthened sidewalls allow them to retain their shape even when all of the air escapes. One of the advantages, experts say, is that tyre bursts, which can be potentially dangerous in conventional tyres, do not affect run-flat tyres, which can be driven as far as 150 miles at speeds up to 55 mph after a burst.

Posting a profit

After three years of losses, Goodyear posted a profit in 2004 and is on its way to doing the same this year.

The company's investor meeting was its first since April 2003.

Keegan does not know whether the cost cuts from plant closings and shifting the sourcing of raw materials to Asia and other cuts will be enough. The savings could amount to as much as $1 billion.

"The frank answer is: We don't know," Keegan said. "We don't know whether we will continue to see the escalation of raw materials costs or not."

Goodyear still faces challenges from escalating raw materials prices, rising health care costs, competition from low-cost tyres sourced from Asia and the health of the auto production markets.

But much has changed since the last investors meeting, Keegan said: "I slept better last night than I did before the meeting two and a half years ago."

From Automotive News (A Crain publication)