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Goodyear to build new plant by 2017
Tire company says it will begin site selection on a plant to serve North and Latin Americas

Morning Edition Host
Amanda Rabinowitz
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Akron-based Goodyear Tire and Rubber says it plans to build a new plant in the Americas for the first time in more than two decades. On a conference call with investors Thursday morning, Goodyear says the new factory is one of handful of initiatives benefitting from increased cash flow. The company will spend about $500 million on the factory that will produce about six million tires annually.

Vice President and CFO Laura Thompson says site selection is under way and that tire production is expected to begin in the first half of 2017.

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 “Clearly that plant has to be able to meet the needs of both North America and Latin America," Thompson said. "So there are many, many criteria including things like looking at the currencies, looking at the labor rates, looking at the electricity flow, looking at all the different things that go along with it.“

The trade publication Tire Review is reporting that Chester County, South Carolina, is the prospective site for the plant, but Goodyear says speculation is premature. The last time Goodyear built a plant in the region was in 1990 in Napanee, Ontario.  Thompson says a decision on the new plant’s location could be made by the end of the year. 

Goodyear Tire & Rubber Press Release:

AKRON, Ohio, May 29, 2014 – The Goodyear Tire & Rubber Company today announced an update to its 2014-2016 capital allocation plan focused on increasing shareholder returns and capturing high-return growth opportunities in North America and Latin America.

Due to Goodyear’s strong 2013 free cash flow, which enabled the full funding of its hourly U.S. pension plans in early 2014, the company is reallocating approximately $1.1 billion of its
2014-2016 cash flow.

The updated capital allocation plan, which aims to increase shareholder value by providing approximately $650 million in returns to investors, strengthening the balance sheet and investing in high-return growth, includes:

•  Allocating an additional $300 million to growth capital expenditures to enable the company to build a new plant to serve its North American and Latin American consumer tire businesses and capitalize on the anticipated growth in high-value-added tire markets in the two regions.
•  Increasing the quarterly cash dividend on Goodyear’s common stock by 20 percent to
6 cents per share from 5 cents per share beginning in September. The payout represents an annual rate of 22 cents per share for 2014 and 24 cents per share for 2015.
•  Increasing the share repurchase program by $350 million to allow Goodyear to acquire up to $450 million of its stock through 2016.
•  Based on company performance, the shareholder return program can be increased up to an additional $250 million, to a total of $900 million.
•  Allocating an additional $400 million towards debt reduction, further strengthening Goodyear’s leverage metrics and advancing the company’s objective of achieving an investment grade credit rating.

“This updated capital allocation plan for 2014-2016 reflects Goodyear’s commitment to balancing all our priorities – returning cash to shareholders, investing in high-return growth projects and achieving investment grade metrics – to drive long-term shareholder value consistent with our articulated strategy,” said Richard J. Kramer, chairman and chief executive officer.

The new tire plant will support Goodyear’s long-term growth in high-value-added consumer replacement and original equipment market segments. “Our investment supports another key element of our strategy – to focus on winning with consumers in profitable market segments,” Kramer said.

“With growing consumer demand for our high-value-added tires in North America and Latin America, the time is right to invest in additional manufacturing capacity in the Americas to maintain Goodyear’s leading position and to grow earnings beyond 2016,” he said. “Goodyear is well-positioned to meet this market demand and has a proven track record of producing strong returns on capital investments.”

Goodyear plans to invest approximately $500 million to build the new plant, which will be its most technologically advanced and have an initial capacity of about six million tires per year. Capacity can be increased as demand increases. Site selection is underway to identify the best location for the plant to support North America and Latin America customers. Tire production is expected to begin in the first half of 2017.

The company also reaffirmed its 2014-2016 financial targets, which include:

•  Segment Operating Income growth of between 10 percent and 15 percent per year and
•  Annual positive Free Cash Flow from Operations.
Additionally, the company continues to expect a 2 percent to 3 percent increase in unit volumes for 2014 over 2013.

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