The combined data of tyres sold and annual revenues of Goodyear and Cooper Tyre is huge- About 200 million tyre in terms of tyres sold and annual revenue of $17.5 billion. Goodyear and Cooper will now focus on the replacement tyre business that is, 80% of their efforts will be on this sector of the tyre business.
The Goodyear and Cooper will now focus on replacement tyre market according to Kramer and Hughes.
“It will solidify our place as one of the world’s top three tyre manufacturers,” Goodyear Chairman, CEO and President Rich Kramer told investors on Feb. 22, the day the two Ohio-based tyre companies announced their plans to merge.
The advantages of Goodyear's acquisition of Cooper is huge. The company will have a larger market presence in the USA and China which Kramer says is the two largest tyre markets in the world accounting for approximately one-third of global industry volume.”
In the U.S, the combined companies sold 64 million consumer replacement tyres in 2019 (including private labels), and another 10 million in the original equipment U.S. channel. In China in 2019, Goodyear and Cooper combined for 5 million consumer replacement units, and 9 million consumer OE tyres.
Also See:CEO's Of Goodyear & Cooper Tyre Discuss The Merger
Worldwide, the two companies have 38 manufacturing facilities that is 30 from Goodyear and eight of Cooper. Kramer believes that the product portfolio and the multiple brands in both the top and mid-level tiers are an important part of the merger of the two companies and its growth.
“Given industry trends in the U.S. market we believe there are significant advantages to offering a more comprehensive portfolio. This robust suite of brands will allow us to have an unmatched product offering across the entire value spectrum assuring we can meet the needs of all customers and consumers,” Kramer said.
Brad Hughes, CEO and President of Cooper, agreed. “We’ll also have the flexibility and world-class talent required to invest and innovate and to continue to meet the needs of an evolving and competitive industry landscape.”
Also Read:Goodyear Tyre To Acquire Cooper Tyre For $2.5 Billion
Goodyear was expecting benefits in terms of larger scale in manufacturing and with the opportunity to acquire Cooper tyre, Goodyear sees a growth in the distribution network. This will include TyreHub as well as Goodyear's retail e-commerce platform and mobile tyre installation business.
Kramer said, “We also see value and further opportunities to expand capacity to Cooper’s low-cost facilities over time, offering attractive capital efficiency and strengthening product supply in the future.”
In all, the companies have identified $165 million in savings from synergies to come within two years of the deal’s closing, though Darren Wells, executive vice president and chief financial officer at Goodyear, stressed those savings do not include consolidations in manufacturing.
“There are no manufacturing savings embedded in the $165 million,” he said.
The bulk of those savings would come from duplicate SAG expenses, corporate overhead and research and development spending, with additional savings from warehouse consolidation and freight optimization.
There are additional financial advantages that is, an estimated $450 million in tax savings and one-time capital savings of $250 million.
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