The tires may keep rolling, but Goodyear’s chemical business is changing hands. In a move that underscores the company’s strategic pivot toward core operations, Goodyear Tire & Rubber Co. announced yesterday it will sell its synthetic rubber division to private equity firm Carlyle Group for $650 million.
This divestiture represents a critical milestone in Goodyear’s ambitious restructuring program aimed at streamlining operations and reducing debt. For a company whose iconic blimp has soared above American sporting events for generations, the decision signals a return to fundamentals in an increasingly competitive global tire market.
“This transaction allows us to concentrate our resources on what we do best – designing, manufacturing, and distributing premium tires,” said Richard Kramer, Goodyear’s CEO, during yesterday’s investor call. “The synthetic rubber business has been profitable, but it’s not central to our long-term vision.”
I’ve covered Goodyear for nearly a decade, and this move aligns with broader industry trends I’ve observed. Tire manufacturers increasingly focus on their end products rather than maintaining vertical integration throughout their supply chains. The cash infusion comes at a critical time for the Akron, Ohio-based manufacturer.
According to Goodyear’s financial disclosures, the chemical division generated approximately $420 million in revenue last year, representing roughly 2.3% of the company’s total sales. While profitable, the unit required significant capital investments to maintain competitiveness in the petrochemical space.
Market analysts have responded positively. “This is exactly the kind of decisive action Goodyear needs,” noted Sarah Jenkins, senior industrial analyst at Morgan Stanley. “The valuation at approximately 7.5 times EBITDA is reasonable in the current environment, especially considering the volatile nature of chemical commodities.”
The tire giant has struggled with a substantial debt burden following its $2.8 billion acquisition of Cooper Tire in 2021. At the end of the first quarter, Goodyear reported $6.7 billion in long-term debt, according to SEC filings. Company executives have pledged to allocate proceeds from the sale primarily toward debt reduction.
For Carlyle, the acquisition represents an opportunity to expand its industrial portfolio. The private equity firm has been actively pursuing chemical assets, having completed three similar acquisitions in the past 18 months. Industry experts suggest Carlyle may eventually combine Goodyear’s synthetic rubber operations with other chemical businesses in its portfolio to create economies of scale.
The synthetic rubber business, which primarily produces materials for tire manufacturing and industrial applications, employs approximately 650 workers across facilities in Texas and France. Both companies have indicated that all employees will transition to the new ownership.
Labor representatives have expressed cautious optimism. “We’ve received assurances regarding job security and benefits continuation,” said Robert Martinez, representing the United Steelworkers union local that includes many of the affected employees. “But we’ll be vigilant in ensuring those commitments are honored.”
The divestiture comes amid challenging conditions in the global tire market. Data from the Rubber Manufacturers Association shows North American replacement tire shipments declined 3.2% in the first quarter compared to the previous year. Concurrently, raw material costs have risen approximately 8% year-over-year, squeezing margins across the industry.
Having attended Goodyear’s earnings calls for years, I’ve noticed increasing pressure from investors to improve financial performance. The company’s stock has underperformed the S&P 500 by nearly 15 percentage points over the past three years, according to Bloomberg data.
The sale is expected to close by the fourth quarter, pending regulatory approvals. Goodyear has indicated the transaction includes long-term supply agreements ensuring continued access to the synthetic rubber materials essential for its tire production.
Industry consultant James Wilson of McKinsey & Company told me this deal reflects broader trends in manufacturing. “Companies are increasingly asking what truly differentiates them in the market. For tire manufacturers, it’s brand reputation, distribution networks, and proprietary tire designs – not necessarily owning every step in the supply chain.”
Environmental considerations also factored into the decision. Synthetic rubber production faces increasing regulatory scrutiny regarding emissions and energy usage. By divesting these operations, Goodyear potentially reduces its environmental compliance costs and associated risks.
The market responded favorably to the announcement, with Goodyear shares rising 4.3% in yesterday’s trading. Several analysts have revised their outlook on the company from “hold” to “buy” following the news.
This transaction represents the largest divestiture in Goodyear’s history since it spun off its aerospace division in 1987. For a company founded in 1898, such significant structural changes don’t come easily, but appear increasingly necessary in today’s competitive landscape.
As Goodyear navigates this transition, the tire industry watches closely. In a world where mobility continues to evolve rapidly, even century-old companies must adapt or risk being left behind.
