Elliott pumps up investment in Goodyear; pushes for financial reforms

GoodyearActivist investor Elliott Investment Management LP, which manages funds that have an investment representing an approximately 10% economic interest in Goodyear Rubber & Tire Company, wants the company to strengthen its financial position by refreshing the board, selling its stores and conducting an operational review.

With its 10% stake in the 125-year-old company, Elliot is one of Goodyear’s biggest investors. The investment firm, which manages US$55 billion in assets, is proposing that five new directors join the 12-member board.

Goodyear can use proceeds from selling the store network to pay down debt, improve its balance sheet and financial flexibility, Elliott said in a letter to the board, which it made public.

All of Elliott’s proposed changes could boost Goodyear’s stock price about US$21 to the low-US$30 range, it said.

Elliott, which has a history of taking board seats at companies including Twitter and eBay, said it has identified “experienced executives to spearhead” a board overhaul.

Elliott declined to name the candidates and said it hopes to engage constructively with Goodyear.

The company said its board and management team “have a strong track record of making value-enhancing strategic decisions on behalf of shareholders” and regularly reviews its strategic plan to ensure that “Goodyear is best positioned to deliver strong, sustainable shareholder value.”

Elliott criticised Goodyear, valued at US$3.3 billion, for mismanagement and lagging its rivals, Michelin and Bridgestone. Despite its long history, Goodyear has “failed to deliver on expected financial performance,” Elliott said. Market sentiment is “profoundly negative”, leaving the stock “orphaned” with only a small number of analysts covering the company, the firm said.

It projected that the Goodyear-owned store network could be worth as much as the entire company under proper management.

“Our recommendations – enhancing leadership and oversight, monetizing Goodyear’s retail platform, and developing a margin improvement plan – will make Goodyear a better company for its customers, employees and shareholders for decades to come,” Elliott portfolio managers Marc Steinberg and Austin Camporin said.

Meanwhile, Goodyear released a statement to say it values input from its shareholders and regularly engages with them. “We are reviewing Elliott’s recommendations, and we intend to meet with them to discuss their views in more detail,” it added.

“Goodyear’s Board and management team have 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. As part of our Strategy Roadmap, Goodyear continues to strengthen our leadership position in the global tire industry as we advance our connected business model and innovate for the future of mobility,” it furthered.