Akron's Different View--Goodyear CEO sees Japan opening up

We could have danced around the issue a bit more delicately, but chief executives aren't always given to great exhibitions of political correctness.

When controversy arises, the best policy for some is to say as little as possible and stay away from journalists.

But Samir (Sam) Gibara, president, chairman and CEO of Goodyear Tire & Rubber Co., wasn't going to let a few discouraging words from the chairman of Toyota Motor Co., Japan's largest automaker, cloud a momentous day for the Akron, OH, tire producer.

Mr. Gibara was in Detroit recently for a luncheon speech during the Auto-Tech conference hosted by the Automotive Industry Action Group. He proudly declares that the company's new "global alliance" with Japan's Sumitomo Rubber Industries Ltd. allows Goodyear to reclaim the title as the world's largest tire maker.

Toyota Chairman Hiroshi Okuda didn't badmouth the Goodyear deal publicly. But just a few weeks earlier he raised great concern about the numerous foreign companies acquiring or increasing their holdings in Japanese suppliers (see WAW - Sept.'99, p.31) as they find good deals in the financially troubled region.

Like other Japanese automakers, Toyota has a strong bond with its suppliers, and foreign encroachment could forever alter that relationship. "Why mix different nationalities and cultures at this stage of our development when we don't have to?" Mr. Okuda tells the Asian Wall Street Journal. He says Japanese suppliers should remain "pure-blooded."

Mr. Gibara sees it differently, having inked a deal that he describes as a first of its kind between a company from the West and one from Japan. He does not refer to the Sumitomo deal as an acquisition, even though Goodyear makes a $936 million cash payment to the company.

The Sumitomo pact gives Goodyear a significant presence in Japan. "Until now, the Japanese economy did not accept direct investments from a foreign enterprise," he says. "I predict that in the next decade, Japan - no longer solitary and introverted - will join other industrialized nations in many more transnational deals."

The alliance creates four joint venture companies, including two in Japan that Sumitomo will control. Goodyear will control the other ventures, which are focused on North America and Europe, as well as global purchasing and technology sharing. Goodyear also now controls Sumitomo's Dunlop operations in North America and Europe.

The deal adds $2.5 billion in annual sales to Goodyear, which reported 1998 sales of $12.6 billion. In April, the company recorded rationalization charges of $167.4 million as part of a cost-cutting campaign that eliminates 4,200 jobs.

Mr. Gibara maintains that Japan will continue to see aggressive moves, like Renault SA'spartial ownership of Nissan Motor Co. Ltd. "In a global market, I don't see how Toyota or any company can operate in different markets without wanting to make agreements with local suppliers or local customers or other competitors," Mr. Gibara tells WAW.

Such a movement does not necessarily represent a threat to a "pure-blooded" Japanese supply base, he adds.

"The automobile industry in Japan has been buying tires from exclusive Japanese suppliers for ages - Bridgestone, Sumitomo, Yokohama," he says.

"Now Toyota is expanding globally. They need suppliers who can supply them globally. As a result of this Sumitomo deal, Toyota called us ... and we're going to be supplying them in Japan for the first time. They will start buying tires from Goodyear for the Japanese market because they know they need Goodyear in North America where they operate, in Europe where they operate. It's a natural extension of our relationship with them." o