Stanley C. Gault has been a miracle worker at Goodyear Tire & Rubber Co. When he arrived as CEO in June, 1991, after an enviable record at General Electric Co. and Rubbermaid Inc., the troubled company's stock rose 23% in days, and Gault quickly made good on his reputation as a man who knows both how to market and how to please Wall Street. He cut costs, pushed new products, sold off nontire assets, issued new stock, and slashed the choking debt.
But Gault's reputation as a man who "came down out of the mountains with all the tablets," as one former Goodyear official puts it, is starting to fray. While the leading U.S. tiremaker is still producing solid earnings gains, its stock plunged 26.5% last year (chart), the second-worst performance among the Dow Jones industrials.
Perhaps more damaging, a key Gault marketing strategy of pushing Goodyear-brand tires into new distribution channels has antagonized independent dealers, prompted at least one lawsuit, and, outsiders say, has not produced the hoped-for market-share gains. Gault remains unfazed. Last year, he says, "we improved on every front." Still, he needs a quick fix if the misstep is not going to stain his record and pose problems for his unknown successor: Gault, 69, retires at year's end.
STOCK DROP. Like other automotive stocks, Goodyear plunged during 1994 because investors fear higher interest rates will hurt U.S. new-car sales and thus demand for tires. Rising raw materials prices, meanwhile, are pressing profit margins. Gault says Wall Street just hasn't come to appreciate all the progress the company has been making and that U.S. car demand isn't as crucial as some think, since North American sales of new vehicles account for just 20% of Goodyear's overall revenues. Goodyear, he boasts, last year again made more money than all its competitors combined. Analysts estimate the year's earnings at about $563 million, up 15% over 1993's return. While he won't make a specific earnings projection, Gault declares: "I don't think we'll disappoint the financial community."
The company's problem with its dealers goes back to 1992, when Gault announced it would start selling Goodyear-brand tires through Sears, Roebuck & Co., the nation's largest tire retailer. That way, Goodyear could reach customers it never had a chance at, he argued. For Goodyear dealers, many of whom sell Goodyear products exclusively, the move was a blow.
A bigger shock followed in 1993, when Goodyear announced it also would sell its brand-name tires to Wal-Mart Stores and Discount Tire, a Scottsdale (Ariz.)-based retailer known for its low prices. "It's not the same old Goodyear," declares one big dealer. "I don't think their ultimate goal is to have a win-win situation." In California, four dealers filed a class action in July, alleging that Goodyear's moves diminished the value of their businesses and breached its contracts with them. Says Norman Taylor, a San Diego dealer who is one of those suing: "We have totally lost faith in Goodyear because they were not honest with us."
Gault won't discuss the suit but says the new distribution increased car-tire market share for Goodyear's name brand. However, after some initial gains, Goodyear's share has plateaued. Modern Tire Dealer, an industry publication, estimates Goodyear's share at 16% in 1994, flat with 1993 and 1 point higher than in 1991. Goodyear disagrees, claiming market share is up 2 points since 1991. Either way, the gain is less than it hoped to achieve.
HAPPY TALK. Gault says the new distribution hasn't hurt dealers as much as some claim but admits that "we probably could have communicated and executed [the distribution moves] more palatably." Now, Executive Vice- President Samir F. Gibara is trying to mollify dealers. Later this month, at a dealer conference in San Diego, he will unveil a program aimed at turning around relations. Goodyear won't describe it, but dealers say it will include exclusive products and a remaking of the sales organization.
Together with another executive vice-president, European chief and manufacturing veteran William J. Sharp, Gibara, an Egyptian-born finance man, is a leading candidate to succeed Gault. A third executive vice-president, Robert W. Tieken, is a long shot, and Gault isn't excluding an outsider. The choice probably will become clear this spring.
Asked if he's concerned that his status as a marketing guru may have lost some luster, Gault replies: "I want all members of the Goodyear family, which certainly includes the Goodyear independent dealer, to be happy and satisfied." And he says he has taken "a close interest" in programs to assure that. Now, he had better hope they work.