Goodyear May Be Getting Some Traction At LastZachary Schiller
In his decade at Rubbermaid Inc., Chairman Stanley C. Gault turned a humdrum housewares company into a Wall Street darling by launching an avalanche of new products from mops to toolboxes. Now, as new chief at Goodyear Tire & Rubber Co., he's facing a much tougher challenge: convincing drivers, most of whom look long and hard at the price tag when buying tires, that they should pay more for better products. "I will not be sold that a tire is a tire is a tire," he said recently.
Did somebody say "tire"? On Sept. 30, Gault is scheduled to step onto the aircraft carrier Intrepid, a tourist attraction moored at a Manhattan pier, and unveil four new tires. It will be Gault's first big test as a tire marketer--and the first clear sign of whether he'll succeed in turning around Goodyear.
EXOTIC LOOKS. The early indications are good. Among the new lines introduced to dealers at a Sept. 19 meeting in Chicago is a "green" model promising 4% fuel savings, an all-purpose Wrangler for pickup trucks and vans, and a new line of Eagles for the high-performance market Goodyear has long dominated. But the centerpiece is an all-season model christened Aquatred, aimed at providing good traction on wet roads. "You cannot hydroplane on these tires," boasts Executive Vice-President Eugene R. Culler Jr.
Gault is banking on an eye-catching new design to back up that claim. A channel runs down the middle of the tire, which looks almost like two motorcycle tires bonded together. "It's something to talk about," says Ron Kramer, a Goodyear dealer in Norfolk, Va. "Differentiation is hard, and I think Goodyear is really doing something about it." Convincing consumers that Goodyear tires can do what ordinary tires can't is, in fact, a cornerstone of Gault's strategy, says a top Goodyear executive. The hope is that family-car owners will be willing to pay $360 a set, about a 5% premium over Goodyear's top-of-the-line general-market tire, the Invicta.
It will take more than exotic new looks to restore Goodyear as a marketing powerhouse. The company is hobbled by $3.7 billion in debt, a money-losing oil pipeline, and what Gault has called "an excessively high cost structure." Although it made money in the second quarter, the first half ended with a loss of $68 million, after $60 million in special charges, on sales of $5.3 billion. Still, Wall Street has gotten plenty excited over the company's prospects. The stock has soared (chart), thanks in part to a move by all the big industry players to boost replacement-market tire prices by as much as 6% to 8%. Some analysts now predict $3 or more a share in 1992 earnings, up from an estimated $1 or so from operations this year.
Many of the elements of a turnaround were in place before Gault came on the scene in June. His predecessor, Tom H. Barrett, instituted cost cuts. Coupled with somewhat stronger U. S. tire demand and lower raw-material costs, Goodyear's fortunes were likely to improve without a management change. The price hikes won't hurt either.
Still, Gault has made his mark. He accelerated the timetable for new products that were well along when he arrived. And Goodyear, which is increasing the amount it pays dealers to help them advertise, promises a big TV blitz in 1992, starting with the Winter Olympics.
MORALE BOOSTER. So far, Gault's main achievement has been to raise spirits at the company. "I think, from an attitude and morale standpoint, this thing has completely turned around," says John H. Kauffman, a big Goodyear dealer and wholesaler from Atlanta. Gault has held highly visible meetings with employees--"associates" as Gault calls them--and customers. When he learned that associates in one department had taken out light fixtures to save on energy costs, he not only went and congratulated them, he took out the seven decorative lamps in his own office.
More big changes are ahead. Gault is likely to trim the vast number of tire models. And he's mulling an overall marketing strategy that makes the most of the company's powerful dealer network, yet takes into account the growing role of discounters. But Gault is mum about those plans for now.
Then there's the competition. Some are fighting for consumers' attention with more new products, including a tire from Michelin Corp. that's guaranteed for 80,000 miles. In short, Goodyear is rolling again, but there are plenty of bumps in the road ahead.