Goodyear's growth good for business

Goodyear Tire & Rubber Co.'s purchase of Cooper Tire & Rubber Co. makes sense to tire industry observers. Goodyear is expected to boost sales, save costs and gain critical size in its planned purchase of Cooper Tire. Goodyear, the third-largest tire company in the world, will strengthen its position as No. 1 in the U.S. market and nearly double its presence in the growing China market in buying Cooper, Goodyear said. Cooper is the 13th-largest tire maker in the world. "This is a size-driven business," said Kiyohiko Ito, distinguished professor of management at the University of Hawaii at Manoa. The bigger a company, the lower its costs of production and distribution per unit, he said. "The global tire industry, the competition is like a dog eats a dog. It is really, really tough," Ito said. "Only a few companies from each country, I mean the big nations ... survived." The concentration of the industry into larger companies continues, he said. "Small companies are unable to survive at this moment in the tire industry," Ito said. Cooper Tire is comparatively smaller than some other countries around the world, he said. "The acquisition of Cooper will further strengthen Goodyear's leading position in the global tire industry," said Richard J. Kramer, Goodyear chairman and chief executive officer. "We will solidify our place as one of the world's top three tire manufacturers." The acquisition of Cooper will make Goodyear the supplier for more automakers in China, while creating broader distribution for Cooper replacement tires through Goodyear's network of 2,500 branded retail stores. Goodyear will see sales growth, offer more diverse products and benefit from cost savings. In the brutal tire industry, size and scale has become increasingly important. The bigger a company, the lower its costs of production and distribution per unit. "We will leverage our advantages in manufacturing, distribution and innovation as we combine the two businesses," Kramer said. The tire industry, along with the entire automotive industry, is recovering from the pandemic slump.