Sumitomo Rubber Industries and Goodyear tyres have agreed to walk away from their 16-year-old global tyre alliance. As per the deal, Goodyear will have to pay $271 million for now and $55 million over the course of three years. It is cited that violation of anti-trust laws has led to this breakup.
The terms of the deal give Goodyear the rights to sell Dunlop-brand tyres in North American replacement markets and Original Equipment markets throughout Europe whereas Sumitomo will recieve 75 per cent interest in Goodyear Dunlop Tyres North America including a factory located in Tonawanda, New York. It will also get the rights to sell Dunlop-brand tyres directly to Japanese vehicle manufacturers’ subsidiaries in Canada, the US and Mexico.
Commenting on the matter, Richard Kramer, CEO, Goodyear Tyres, said, “While we have derived value from the alliance over the last 16 years, Goodyear is well positioned today to pursue our strategy on our own and this successful resolution increases our flexibility to grow profitably as we continue to focus on delivering strong performance and sustainable economic value.”
Sumitomo believes that this agreement will give them greater autonomy over their business, including original equipment tyre business with Japanese manufacturers and will allow them to have their own manufacturing and R&D facility in North America and Europe. Sumitomo also mentioned that, after this deal, they would be able to develop Falken Tyres into a stronger brand.
The transaction needs to go through some of the formalities including regulatory approvals and SRI’s completion of Labour agreement with United Steelworkers union from Tonawanda manufacturing unit.