Goodyear Trying to Get US Car Makers to Run-Flat

NEW YORK, Sept 23, 2005; David Bailey writinfg for Reuters reported that Goodyear Tire & Rubber Co. hopes to get U.S. automakers to adopt run-flat tires as original equipment, one part of its strategy for profitable growth over the next decade, Chief Executive Robert Keegan said in an interview on Friday.

"The BMWs, Mercedes and Audis of the world have adopted run-on-flat technology as the standard," Keegan said after an investor meeting. "I am promoting, cajoling and trying to push the decision makers in Detroit in that direction."

Run-flat tires have been available on Chevrolet Corvettes since 1994, but the move toward run-flat tires has moved much more quickly in Europe, he said.

"The consumer need and instinct for run flat tires is there," Keegan said. "It is very difficult to drive the run-flat program through the replacement market first. Our perspective is that it has to be run through the OEs (original equipment)."

Goodyear unveiled three years of cost cutting plans to investors on Friday, a continuation of reductions started two years ago that have included plant closings and sales of noncore assets.

"(Run-flats are) a key part of the strategy for the next decade," Keegan said. "We believe we have a technology and a current product line that consumers would love to have. What's the number one anxiety point, having a flat or a blowout."

The tires come at a premium of about 15 percent to 20 percent over other tires as original equipment on European models, Goodyear said.

Run-flat tires do not actually run flat. Strengthened sidewalls allow them to retain their shape even when all the air escapes. One of the advantages, experts say, is that tire bursts, which can be potentially dangerous in conventional tires, do not effect run-flat tires, which can be driven up to 150 miles at speeds up to 55 mph after a burst.

After three years of losses, Goodyear posted a profit in 2004 and is on its way to doing the same in 2005. The company held its first investor meeting since April 2003 Friday, announcing the continuation of cost cuts.

Keegan does not know whether the up to $1 billion in cost cuts from plant closings, shifting the sourcing of raw materials to Asia and other cuts will be enough.

"The frank answer is, we don't know," Keegan said. "We don't know what the headwinds will be ... whether we will continue to see the escalation of raw materials costs or not."

Goodyear still faces challenges from escalating raw materials prices, rising health care costs, competition from low-cost tires sourced from Asia and the health of the auto production markets, but much has changed since the last investors meeting, Keegan said.

"I slept better last night than I did before the meeting 2-1/2 years ago," Keegan said.