Goodyear Tire’s transformation plan is underway — in the sky and on the ground

AKRON, Ohio — Does the Goodyear blimp sell tires?

That was one question veteran auto executive Mark Stewart had when he started as CEO of Goodyear Tire & Rubber Co. a little more than a year ago, seeking to lead a transformation plan for the quintessential American company.

For a century, Goodyear Tire has used more than 300 helium-filled airships to tout its brand. Stewart wanted to ensure consumers connected the blimps to the company’s products and services, which it has increasingly done as Goodyear celebrates the 100-year anniversary of its first blimp, called Pilgrim, in 1925.

“The answer is yes it can, and yes it does,” Stewart told CNBC during an interview at the company’s headquarters. “It really is about using one of our most powerful marketing icon pieces, the blimp, both here as well as in Europe, to in fact sell tires.”

The blimp question was an easy one to answer compared with the rest of the challenges Stewart, who has become known for transformation plans, has tackled since joining the company in January 2024.

Much like automakers and related suppliers, Goodyear’s business is rapidly changing with new technologies, increased competition from low-cost countries such as China and investor skepticism on whether a legacy company can transform itself to be more efficient, profitable and competitive.

Goodyear’s answer, which was prompted by activist investor Elliott Investment Management revealing a stake in the company in 2023, is “Goodyear Forward” — a two-year transformation plan that ends in December.

The plan includes doubling operating income margin to 10%, enacting top-line and cost reductions of $1.5 billion, and bringing in gross proceeds of $2 billion in business asset sales. It’s also reducing its debt load by $1.5 billion, net of approximately $1.1 billion for restructuring.

To assist, the company is investing in and deploying artificial intelligence technologies and 3D-printing for things such as tread teeth, as well as using simulation to speed development and production of its products.

Roughly halfway through the initial plan, Stewart said Goodyear is ahead of schedule for its benchmarks, including upping the cuts by $200 million. But investors remain skeptical amid geopolitical uncertainty such as tariffs and a disbelief in the longevity, or “stickiness” in tire terminology, of the changes.

Stewart believes Goodyear is at a “show me” period with investors, which he plans to continue to deliver on as the company has reported five consecutive quarters of margin growth and its best retail performance in more than 20 years.

“We’re continuing to execute, and I think we’re doing a better job of communicating in terms of our single and double hit wins as we go through the Goodyear Forward, and structurally changing the business,” said Stewart, whose father worked at an Alabama plant for Goodyear’s recently sold Dunlop brand. “It’s continuing to stack those up.”

Shares of Goodyear received a 17% boost after the company reported its 2024 and fourth-quarter results. But shares of the company are down 30.3% since the plan’s announcement, and 33.4% since Stewart became CEO.

A spokesperson for Elliott, which has taken board seats at companies including Southwest Airlines and eBay, declined to comment on Goodyear. Goodyear reached a cooperation agreement with Elliott, which FactSet reports retains a roughly 9% stake in the company, that included adding three directors to its board.

Stewart succeeded Goodyear CEO Richard Kramer, who retired after 14 years leading the company.

Goodyear is well on its way to achieving its plan, but its success is not guaranteed. In addition to achieving its own targets, it’s unclear how changing regulations such as President Donald Trump‘s tariffs will impact the tire company’s business.

Stewart, prior to the implementation and then delay of 25% tariffs on Canada and Mexico for automakers and suppliers, declined to go into detail on Goodyear’s preparation and potential contingency plans for such tariffs on North American operations as well as other countries.

“We’re running all the scenarios with that right now,” Stewart said. “And bottom line is we’ll continue to add projects into Goodyear Forward to keep marching on our journey.”

Goodyear has built up an international business from its humble beginnings 127 years ago in Akron, Ohio. The company employs about 68,000 people and manufactures its products in 53 facilities in 20 countries, with major operations in North and South America, Asia-Pacific and Europe.

Its manufacturing operations in the Americas, which represented roughly half of its tire sales in 2024, include making tires in eight plants in the U.S., two plants in both Canada and Mexico and a plant each in Brazil, Chile, Colombia and Peru.

The Goodyear Forward plan reaches across the operations, aiming to achieve the goals through a mix of cost cutting, headcount reductions and making the business more efficient through new processes and technologies.

In addition to those targets, Stewart also has set priorities to re-establish focus on its retail business, increase fleet business, including telematics, and ink high-profile business deals such as Goodyear’s first launch in decades on a Ferrari sports car.

“Goodyear Forward is just getting embedded into our DNA,” Stewart said. “What’s next for us is we are going to get aggressive about growth in retail and service. We are getting aggressive in growth in the high-end [tires].”

But the process, material chemistry and production of tires continue to evolve. Goodyear has expanded its top-tier products to include massive tires for off-road vehicles such as the Jeep Wrangler and Ford Bronco, as well as the Tesla Cybertruck and large SUVs that feature 22-inch or 24-inch wheels such as the Cadillac Escalade.

Such businesses are highly profitable for the company, which is investing an unspecified amount into a facility in Oklahoma to expand production by 10 million units annually and modernize the plant.

“We will ensure we’re running at the optimal level of output and efficiency, and we’re running the products that will yield the highest opportunities for profitability this year,” Stewart said last month on the company’s quarterly call.

In Asia–Pacific, where its newest plants are located, the company has been able to capitalize faster on such business. It increased its segment operating income by 37% last year to $277 million, with an operating margin of 11.4% — a juxtaposition from Western automakers with escalading problems in the region, specifically China.

While its Asia–Pacific business is a tailwind at the moment, products from competitors and nearby nations are not. Similarly to how Chinese automakers have expanded outside their own country, tire manufacturers such as Sumitomo and Yokohama have been increasingly exporting products.

Tires from that region have undercut Goodyear, as companies rushed to purchase them ahead of potential tariffs. Low-end imports outperformed the U.S. industry last year and grew 11%, CFO Christina Zamarro said during the company’s quarterly earnings call.

The company said low-cost imported tires are largely sourced from Southeast Asia, including from a number of countries that are either not subject to antidumping or countervailing duty tariffs.

“As we look at the top line this past year, we’ve seen growth in the low-end imports impacting the consumer replacement industry in the U.S., Europe, as well Brazil,” Stewart told investors. “The inflows at the low-end of the market over the last two years are unprecedented.”

Goodyear’s the last major U.S. tire company: Its largest competitors globally are France-based Michelin; Bridgestone Corp., which is a subsidiary of a Japanese-based company; and German-based Continental.

Down the road from the factory, which features wood floors similar to those in the factory in Detroit where Henry Ford started building the Model T in 1900s, is a different Goodyear.

Walking into the nondescript building in the shadow of the headquarters is a glimpse into the future Stewart wants for the company.

In the building is Goodyear’s simulation machine, a multimillion investment that promises to cut research and development costs and time, while improving product profits.

To be clear, no actual tires are used in the simulator and the “vehicle” cockpits — a hatchback and a pickup truck — are held up by hydraulics, surround by 270 degrees of screens.

“The goal is to be able to evaluate and test tire designs and theories virtually before ever having to spend the money to build a mold or build the tire,” said Patrick Renz, a senior engineer at Goodyear. “We’re really using this now to win [automaker business].”

Goodyear has worked with many of the major automakers on such virtual development, including Ferrari, according to Renz. He said the earlier in the development Goodyear can work with a company, the more impactful the virtual testing can be.

Mahesh Kavaturu, Goodyear senior director of global performance and simulation technology, said such simulations, as well as AI, aim to transform Goodyear’s processes.

“We actually have a lot of capabilities on physical tire testing, and now we are getting into artificial intelligence, machine learning,” he told CNBC in the company’s “Innovation Center” that includes conceptual and unique products made by the company such as airless tires. “In Goodyear, [AI] is not a buzz word.”

On Wall Street, hype is building for Goodyear, but many investors remain on the sidelines waiting to see if the company’s recent efforts under Goodyear Forward can be ingrained in the company as much as its blimps.

Goodyear’s stock is rated overweight with a target price of $11.47 a share, according to nine analysts compiled by FactSet.

“The company has reported inconsistent levels of profit growth over the past several years. But, we believe that an inflection point developed with the reporting of fourth quarter 2024 results, which were much better than we expected,” Argus analyst Bill Selesky said in a Feb. 14 investor note upgrading Goodyear to buy.