Engineer

STRENGTHS Size Product diversity Total market coverage An American company International sales Generally increasing sales revenue since 1991 Brand recognition Brand loyalty Reduction in debt since 1991 Introduction of new tire lines The Blimp P/E ratio The world's No. 1 tire manufacturer Patents: 2,903 Trademarks: 5 WEAKNESSES Size Declining stock price Internet sales Dealer contracts that my be inhibiting Internet sales Layoffs Sales declines in Europe, Asia, Latin America OPPORTUNITIES New international markets: China, India, Russia New international markets: Internet sales R&D expendituresinnovations THREATS Competition: Internet sales Wholesale club stores (tire sales) Bridgestone Cooper Continental Michelin Pep Boys (auto service stores) Midas (auto service stores) Auto Zone (auto service stores) Independents OVERVIEW OF STRENGTHS Size still matters and Goodyear has size. Its 1999 sales were $12,881,000,000 representing a one-year sales growth of 2%. Its net income was $241,000,000, a lot of money but a decrease of 64.7% from one year earlier. Despite that drop in net income, Goodyear paid a $.30 dividend. Its net income also beat Wall Street's expectations. It has become the world leader in tire sales as a result of its alliance with Japan's Sumitomo Rubber Industries. Goodyear ranks No. 130 in Fortune Magazine's 500 list of large companies. Its product diversity includes the manufacture and sale of tires, industrial and consumer products from rubber including belts, hoses, and tank tracks, and a wide range of synthetic rubber, resins, and organic chemicals. Goodyear supplies tires to European and North American auto manufacturers and construction and agricultural equipment manufacturers. Good year operates more than 900 retail tire outlets that also provide auto repair services. If you want to buy American, this is the company. Despite its world-wide presence, Goodyear is an American company. Like many American manufacturers, though, it has extended its reach to include international markets in order to stay ahead of its competition. It has more than 90 facilities in 30 countries, and world-wide marketing operations. Two attributes that any company desires are brand recognition and brand loyalty. Goodyear enjoys both. Its blimps are one of the world's most recognized advertising symbols. For 1999, it ranked No. 1 in six of eight categories to lead its industry in Fortune's "Most Admired List". Leadership categories included quality, innovativeness, employee talent, social responsibility, financial soundness, and long-term investment. Of these, quality is probably the most important in creating and keeping brand loyalty. Its P/E ratio is 15.95, a very conservative number when compared to Internet stocks, which frequently have P/E ratios of 50 or more. The industry (rubber/plastics) P/E ratio is 13.65 while the broad market (8,000 stocks traded on the NYSE, AMEX, and NASDAQ, has a P/E of 39.46. Another strength is its intangibles, which include a 100,000-person workforce, patents and trademarks. Goodyear owns 2,903 patents and five trademarks (Goodyear, Hi-Miler, Viper, Vintner, and Allegra). OVERVIEW OF WEAKNESSES As indicated previously, size matters. Size can be a weakness, though, as well as a strength. In 1999, Goodyear's sales were down from 1998 in the Eastern Europe, Africa Middle East market, Latin America market, Engineered Products market, and Chemical Products market. The stock price dropped from a 52 week high of $66.75 to a February 15 close of $24.25. Its EPS (earnings per share) growth dropped 64.7% over the last 12 months. This is a company in trouble. The question is will its size inhibit its recover? Large companies like Goodyear are often compared to aircraft carriers. They need a great deal of time to turn around. The Internet can be a weakness to many companies, not only Goodyear. Is Goodyear preparing to compete with the on-line sale of tires? Customers are no longer obligated to drive to the nearest tire outlet. A customer may go "on-line" and order a tire at the best competitive price, have it shipped to his home, and pay considerably less than he would at his neighborhood tire store. While Goodyear may see the weakness (and opportunity) here, it may be prohibited from using this tool because of its contracts with local dealers. Because of a poor showing in 1999, Goodyear's financial ratios have become a weakness. Following are some examples as culled from Hoover's On-line, The Business Network: Goodyear Industry* Market** Price Sales 0.29 0.59 2.03 Days Sales Outstanding 73.77 54.33 57.93 Inventory turnover 4.2 5.1 6.7 Days COGS in Inventory 85 71 54 Asset Turnover 1.1 1.2 0.4 Net Receivable Turnover 5.4 6.7 6.3 In order to attract the capital necessary to grow, Goodyear must reverse its poor showing. In 1998, it announced a 3% reduction in its workforce (2,800 jobs). *Industry: Rubber/Plastic **Market: NYSE, AMEX, NASDAQ OPPORTUNITIES Four areas present themselves for opportunities: new territories, Internet sales, innovations, and acquisitions. New territories included China, India, and Russia. For the past several years, China has been encouraging capitalism in a somewhat of a hurry up/go slow fashion. With the spread of instant communication