Elliott-stock Goodyear Tire gains as it seeks to shed assets, cut costs under a new CEO
By OXShare
Goodyear Tire, a stock owned by activist hedge fund Elliott Investment Management, saw its value rise by more than 8% during early trading on Wednesday. This surge can be attributed to the company’s unveiling of a significant plan aiming to divest $2 billion in assets and cut costs by $1 billion, among other measures. Additionally, Goodyear stated that Richard Kramer, the current Chairman, CEO, and President, will step down from his position in 2024.
Goodyear announced that it has thoroughly assessed all of its possessions and has made the decision to actively investigate different possibilities for its Chemical business, the Dunlop brand, and its Off-the-Road equipment tire division. Goodyear received financial advice from Evercore, Lazard (NYSE: LAZ), and Goldman Sachs during this process.
The company has implemented a detailed plan to reduce costs in several areas, such as improving operations, optimizing plants, purchasing strategies, and streamlining sales and administrative expenses. These measures are anticipated to save $1 billion annually by the end of 2025. Goodyear has established multiple specific workstreams to ensure that 100% of the targeted cost savings are achieved.
Additionally, the company has revealed plans that will result in a yearly benefit of $300 million by 2025. This includes doubling the segment operating income margin to 10% by the same year, as well as aiming for a net leverage target of 2.0x — 2.5x by the end of 2025.
The analysts from Elliott Investment Management expressed their belief that the “Goodyear Forward” transformation plan is a major and positive move towards making Goodyear a stronger and more profitable company. They thanked Rich for his leadership and the Review Committee for their cooperative involvement. They also stated that they anticipate ongoing communication with the Company as it puts these initiatives into action and strives to provide significant value and benefits for all Goodyear shareholders.