Calls for Enhanced Leadership & Oversight, Monetization of Retail Stores and Operational Review
Sees $21 per Share Value-Creation Opportunity, 179% Upside to Current Share Price
Full Letter and Presentation Available at AcceleratingGT.com
WEST PALM BEACH, Fla., May 11, 2023 /PRNewswire/ — Elliott Investment Management L.P. (“Elliott”), which manages funds that have an investment representing an approximately 10% economic interest in The Goodyear Rubber & Tire Company (NASDAQ:GT) (“Goodyear” or the “Company”), today sent a letter and presentation to the Board of Directors of Goodyear. According to the letter, the purpose of the materials is to outline the right path forward to create value at Goodyear and realize its full potential.
Elliott is one of Goodyear’s largest investors because it has strong conviction in the significant value-creation opportunity achievable at the Company, the letter said. Despite the Company’s strong brand, leading market share and favorable industry tailwinds, Goodyear’s stock has meaningfully and consistently underperformed. The Company’s poor stock performance is a direct result of its significant margin erosion, suboptimal go-to-market strategy, and unfocused brand strategy, which have collectively led to a loss of investor confidence, according to the letter.
To deliver improved results and restore investor confidence in Goodyear, Elliott believes the Company must pursue the critical steps detailed in its Accelerating Goodyear plan, including:
- Enhancing Leadership & Oversight: Appoint five new highly qualified independent directors to the Board to improve governance, bring about a cultural change and help restore confidence among investors.
- Monetizing the Trapped Value of Goodyear’s Retail Platform: Explore ways to monetize Goodyear’s Company-owned store network, which Elliott believes is nearly worth Goodyear’s market capitalization given the multiples of auto aftermarket service businesses.
- Initiating an Operational Review: Form an Operational Review Committee to develop an operational and margin improvement plan.
Elliott believes these steps will strengthen Goodyear’s financial position, bolster its competitiveness globally and create sustainable value, unlocking more than $21 per share in value for shareholders, an increase of 179% to its current share price. Elliott looks forward to engaging with the Board, along with fellow shareholders, as soon as possible.
The full letter and presentation can be downloaded at AcceleratingGT.com.
The full text of the letter follows:
May 11, 2023
The Board of Directors
The Goodyear Tire & Rubber Company
200 Innovation Way
Akron, Ohio 44316
Attn: Mr. Richard Kramer
Dear Mr. Kramer and Members of the Board:
We are writing to you on behalf of Elliott Associates L.P. and Elliott International, L.P. (collectively, “Elliott” or “we”), which together have an investment representing an approximately 10% economic interest in The Goodyear Tire & Rubber Company (the “Company” or “Goodyear”). Elliott is a multi-strategy investment firm founded in 1977 that has approximately $55 billion of assets under management. We have established a long and successful record of investing in the automotive sector and working with automotive original equipment manufacturers (OEMs), suppliers, dealers and finance companies to create sustainable value.
We have become one of Goodyear’s largest investors because we have strong conviction in the significant value-creation opportunity achievable at the Company today. Goodyear is an iconic U.S. manufacturing leader. As the only remaining publicly traded U.S. tire manufacturer, Goodyear plays an important role in the U.S. economy, commands a leading global position, enjoys a strong brand and is poised to benefit from industry tailwinds.
However, despite these advantages, Goodyear’s stock has meaningfully and consistently underperformed. Relative to the S&P 400, Goodyear has underperformed by 90% over the past five years and 143% over the past ten years. Relative to proxy peers, key competitors and relevant indices such as the Dow Auto Parts Index, the story of underperformance is similar:
It is an unfortunate fact for Goodyear and its investors that over the past decade, owning Goodyear stock has been a disappointment. We believe the Company’s poor stock performance is a direct result of its significant margin erosion, suboptimal go-to-market strategy and unfocused brand strategy, which have collectively led to a loss of investor confidence. This loss of confidence has had other consequences: The Company now finds itself capital-constrained and unable to pursue value-creating opportunities, such as high-ROIC investments to support growing its valuable retail store platform.
Our investment in Goodyear is underpinned by our confidence that, with improved financial flexibility and the right oversight in place, the Company has significant upside. In fact, it is rare to find a company with as much potential to increase shareholder value; we believe that by following the recommendations detailed below, the Company can create an additional $21 per share in value – a ~179% increase to its current share price, without any valuation multiple uplift.
In this letter and the appended presentation, we lay out our perspectives on the best path forward for Goodyear. We look forward to working with the Board and our fellow shareholders to realize the value-creation opportunity at hand and to ensure the success that Goodyear’s shareholders, employees and customers deserve.
