Elliott Management attacks Goodyear — and the blimp isn't the problem

Goodyear (GT) has a few flat tires that need fixing, contends noted activist investor Elliott Management.

The firm launched a new campaign against the storied tire maker on Thursday, citing poor margin performance versus rivals, weak board oversight of management, and ill-timed tire distribution deals.

Elliott is pushing for a sale or other action on Goodyear's 1,000-plus retail stores and the installation of five new board members. The names of those board nominees could not be learned.
Elliott thinks Goodyear could be worth $32 a share under its plan. Goodyear stock rose 20% on Thursday afternoon to $14.10 on news of Elliott's involvement.

We value input from our shareholders and regularly engage with them. We are reviewing Elliott’s recommendations, and we intend to meet with them to discuss their views in more detail," Goodyear said in a statement. "Goodyear’s Board and management team have a strong track record of making value-enhancing strategic decisions on behalf of shareholders. We regularly review the company’s strategic plan to ensure that Goodyear is best positioned to deliver strong, sustainable shareholder value. As part of our Strategy Roadmap, Goodyear continues to strengthen our leadership position in the global tire industry as we advance our connected business model and innovate for the future of mobility.”

Sources familiar with the matter tell Yahoo Finance that Elliott would like a board refresh and a review of the management team. There is also chatter about the cost of a new docu-series celebrating Goodyear's 125th anniversary given the lagging stock price and profit margins.

These sources added that the company could even be spending too much to operate the legendary Goodyear blimp, though the firm isn't advocating that Goodyear stop marketing via the highly visible blimp.

The talks with Goodyear are in the preliminary stages, the sources said.

The activist campaign comes amid several challenging quarters as the global economy slows, inflation remains stubbornly high, and consumers push back on tire price hikes.

In late October 2022, Goodyear revealed third quarter tire unit volumes fell 3% from the prior fiscal quarter. Replacement tire volume dropped 9%, underperforming a 3.5% decline for the overall industry. Adjusted net income declined 43% year on year to $116 million while earnings came in shy of analyst estimates.

Goodyear shares lost about 53% in 2022.
The company saw sales only rise by 0.7% in the first quarter of 2023, and Goodyear lost $101 million in the quarter.

Prior to today's pop, shares of Goodyear had fallen about 64% over the past five years.

Source: finance.yahoo.com

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