Desperate times call for desperate measures, and that is exactly what COVID-19 has forced Goodyear to do.
The pandemic is hitting the United States hard and businesses are clearly struggling to survive. Demand has hit an all time low and they simply cant afford to pay their employees' salaries. Goodyear too has been actively furloughing employees, cutting salaries and keeping manufacturing plants closed in the US.
The measures affect almost 4,000 of Goodyear’s U.S. employees, atleast 60% of whom work in Akron itself.
The company has suggested that an unspecified number of U.S. employees will be temporarily furloughed through the end of June, with state and federal unemployment benefits expected to provide two-thirds of their pay during that stretch. Others will have three weeks of unpaid furloughs through June. All will keep their company benefits intact.
Rich Kramer, chief executive officer and chairman of Goodyear Tire & Rubber Co., said on Friday that the company has taken difficult measures but deemed them necessary and part of a “shared sacrifice” approach. He himself is taking a 50% salary deferment, while other senior executives will have their pay defered by 30%. Other mid level managers too will be taking smaller salary reductions.
Kramer underscored that the company’s top priority remains the safety and well-being of its global employees while the second priority is to focus on the business.
“COVID is something clearly unprecedented,” Kramer said. That’s in part because of the speed and ferocity with which it is hitting and also in part because of a lack of clarity on its depth and duration, he said.
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We have had to make some difficult but appropriate decisions to deal with the situation — with an eye to resuming normal operations as soon as possible, he said.
“It’s professional in the sense that it’s business, but it’s also very personal in the sense that these are our associates having been impacted by something none of us created,” Kramer said. “It’s very personal in that regard.”
He suggested that the coronavirus has been nothing like what Goodyear has experienced before in it's 125-year history which includes the Great Depression, the Great Recession, business cycles and more.
“This has been nothing that we’ve experienced, that most businesses have experienced anything like this,” he said. While he and others saw the early spread of the virus in China, Kramer said they had no idea that it would spread as fast and as hard as it has in the rest of the world.
COVID-19 has created what is called a “demand shock,” Kramer said. “Demand is evaporating.”
Put in other words, people and automakers aren’t buying tyres.
Most automakers have shut down production, meaning they don’t need to buy the original equipment tyres Goodyear and others make.
Consumer confidence has also dropped significantly, Kramer said.
While China appears to be bouncing back — Goodyear has a new tyre factory there — people in the United States, Europe and elsewhere are now sheltering in place, he said.
“That means demand is going down,” he said.
