Updated from 2:32 p.m. EDT
rose Monday after the world's largest tire maker said its strategy for increasing profitability was working.
Samir Gibara, chairman, president and chief executive of Goodyear, said in a statement that the company will introduce new products, expand distribution, consolidate production, improve productivity and raise prices.
The company's strategy is to focus more on the higher-margin retail outlets that sell directly to consumers, rather than on sales to auto manufacturers.
Investors were encouraged by Goodyear's apparent success, even in the face of higher gasoline prices that could discourage driving. Goodyear's stock was up 3 5/16, or 13%, at 28 3/8 Monday afternoon. (Goodyear closed up 3 5/16, or 13%, at 28 3/8).
Keith Price, spokesman for Goodyear, said the Akron, Ohio-based company will run its U.S. plants at or near full capacity and increase the amount of tires imported.
"We have been moving into a global strategy where we make tires in any country and sell it in any country," Price said.
Goodyear, and others, are trying to keep pace in front of the rising costs of its chief raw material, oil. Price said Goodyear said it has not yet been affected by motorists trimming their driving plans.
"We have already announced price increases of 2.5% to 5% in Europe," he said. "Those have taken effect in January and February and throughout the whole year." Next week, Goodyear will roll out prices 3% to 5% higher across the U.S. for automobile tires and a 4% to 5% increase for tires for farm vehicle.
At the same time, this year will be a considerably slower year for tire consumption, according to the
Rubber Manufacturers Association's
tire market analysis committee. Total tire shipment will slow to 2.2% growth for 2000, compared with the robust 5.3% growth of 1999, the trade group estimates.
Goodyear's chemical business is also taking steps to increase its prices with the high cost of oil, Price said.
Goodyear said its plans to expand distribution include enticing new dealers to join its network.
The company has been consolidating some plants overseas, closing a tire plant in Italy at the end of February and discontinuing the manufacture of some truck tires at a British plant. Price said he was unaware of any plans for consolidation among U.S. factories.
While Goodyear is also digesting its recent acquisition of
, it made no mention of future acquisitions within the crowded industry. Some analysts of the tire industry contend that companies can grow only through acquisitions.
"The fundamental problem in the tire industry appears to be overcapacity, in our view, in an industry that appears to have limited product differentiation," said Rod Lache, an analyst at
Deutsche Banc Alex. Brown
, in a research report from March 2. "Moreover, we believe that near-term risks related to raw material prices, acquisition integration, new purchasing schemes, and auto makers entering the aftermarket are likely to keep a lid on valuations for the near term."