Goodyear shares jump after major investor’s call for change

Akron, Ohio – Goodyear’s share prices have jumped 21% following a call by a key investor to enhance its profitability through a series of changes.

Company shares were trading at $14.23 by the end of business on 11 May, up from an opening price of $11.72 per share.

In an 11 May letter to Goodyear, Elliott Associates LP and Elliott International LP (Elliot) offered a multi-step strategy to improve the US tire maker’s share values.

As a 10% stakeholder, Elliot claimed: “Relative to the S&P 400, Goodyear has underperformed by 90% over the past five years and 143% over the past ten years.”

“Relative to proxy peers, key competitors and relevant indices such as the Dow Auto Parts Index, the story of underperformance is similar,” it added.

Elliott linked Goodyear's stock performance to “significant margin-erosion, sub-optimal go-to-market strategy and unfocused brand strategy.”

The firm went on to recommend a strategy, which it believed would generate a nearly 180% increase in Goodyear’s current share-price valuation.

This involved appointing five new “highly qualified" independent directors to the board to bring about a ‘cultural change’ and increase confidence among investors.

Elliot also called for the ‘monetisation' of "Goodyear’s company-owned store network, which we believe is nearly worth Goodyear’s market capitalisation.”

The proceeds, it claimed, could be used to pay down debt and improve financial flexibility: increasing Goodyear’s stock price by more than $4 per share.

Furthermore, the investor urged Goodyear to initiate an operational review and to develop an operational and margin improvement plan.

In a statement issued on the same day, Goodyear said it valued input from shareholders and regularly engaged with them.

“We are reviewing Elliott’s recommendations, and we intend to meet with them to discuss their views in more detail,” the Akron-based group said.

Goodyear added that its board and management team has “a strong track record of making value-enhancing strategic decisions on behalf of shareholders.”

“We regularly review the company’s strategic plan to ensure that Goodyear is best positioned to deliver strong, sustainable shareholder value,” the tire maker stated.