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Goodyear-Cooper Deal: Analyst Healy Discusses Brand Positioning, Dealer Network Integration

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"I think the growth of the Cooper brand is going to be enhanced," says analyst John Healy, who covers both Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. (Goodyear plans to buy Cooper for $2.5 billion.)

"Cooper gives Goodyear a stronger brand in the middle of the market," says John Healy, managing director and research analyst with Northcoast Research Holdings LLC., which specifically follows both Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. The two companies have announced that Goodyear plans to acquire Cooper during the second half of 2021.

Goodyear's acquisition of Cooper also "gives Goodyear an opportunity for realignment" of the Akron, Ohio-based tire manufacturer's brands "that they may could not have done organically," says Healy. 

"I think they can put the Cooper brand in the portfolio between the Goodyear and the Kelly and Dunlop brands. Cooper has been more steadily in that tier-two category. I think brands will probably be prioritized.

“There’s going to be increased distribution for the Cooper brand, which has done exceptionally well in legacy markets and now its growth (will be) accelerated. I think the growth of the Cooper brand is going to be enhanced."

Commenting on what the newly announced transaction could mean for Goodyear and Cooper's respective dealer networks, Healy, who writes MTD's monthly Your Marketplace column, says, "I think to some degree, it's a delicate approach. The dealers, in essence, are a large part of what has made Cooper successful. Goodyear would be wise to not rattle that approach too much.

"I think Goodyear realizes the value of the unique approach Cooper has as its model and I believe will be mindful of that."

On the manufacturing side, “It’s too early to say if there will be plant closures," says Healy. "It would be naive to say there won’t be” production adjustments. (Goodyear has four plants in the U.S., plus two plants in Canada and one plant in Mexico. Cooper has three tire manufacturing plants in the U.S.)

“This is not a deal that will be closed until the end of 2021. I would not expect any major plant rationalizations to take place” during the first 12 to 18 months of the integration. “I imagine it will be more realignments than shutterings. I also think Goodyear hopes the Cooper brand will get bigger.”

Goodyear's acquisition of Cooper also should generate "scale and sourcing benefits with raw materials," according to Healy. 

"I think ultimately, being bigger and having more scale and probably looking at production facilities and network and how to optimize is probably easier” with the bigger revenue and synergies that such an acquisition creates, “which will result in better cash flow and higher operating income.”

 

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