Goodyear Investor Alert #6

Yes, We Have No Tires

Strike Impact on Goodyear Customers Grows

• Overview

Since the beginning of the strike Goodyear has been telling its customers and shareholders that it will be able to continue to serve its customers. The Union has cautioned investors that Goodyear’s pre-strike reserves would soon run out and that the Company would lose business and important customers. Public comments by tire dealers can settle this debate.

• Tight Market Even Tighter

According to an article in Modern Tire Dealer this week, in order to get tires, dealers have to “say some prayers and pull some teeth,” and the tires that they are getting are ones that were sitting in the warehouse from before the strike. Goodyear’s largest OTR customer, Purcell Tire & Rubber Co. has not received a shipment from Goodyear since the strike began. Another customer has had to substitute Goodyear tires with another brand.

• Market Share Will Slip

Dealers selling consumer replacement tires have not fared much better. Reports of shortages started almost immediately after the strike began.

On November 22, Kevin Tynan of Argus Research Group told the Fort Wayne Journal that it is unlikely that Goodyear will be able to get to the production level they need to meet demand. “In the near term, if the supply is not there, people will not wait.”

Les Garland, owner of Garland Brothers Tire & Alignment, said in late November that the word “shortage” would be a drastic understatement. “I’m having to bring in other lines just to sell tires. You can not sell from an empty wagon, and the Goodyear-Kelly wagon is empty.”

November was not a great month for Mark White of Discount Tire either, but he anticipates the real problems will start in January and February, when inventories will become depleted. White said that he will recommend other brands when Goodyear tires run out.

• A “Little Bit Of A Shortage”

In November Ed Markey, Goodyear’s spokesman, admitted “In certain sizes and types of tires, there is a little bit of a shortage…” We could quibble about the meaning of the word little, but it is the first shred of truth we have heard from the company about the issue. Some of the states that have contracts with Goodyear got a little bit of truth from the company in October, when Goodyear notified them that as a result of the strike it was invoking the “force majeure” clause of its contracts to supply them with tires. Goodyear did not offer details as to when curtailment would begin, but the letter tells a different story than the one the company tells publicly.

• Word From The Street

Two days ago, Analyst Rod Lache from Deutsche Bank upgraded Cooper Tire & Rubber stock from Hold to Buy. According to Lache: “The Goodyear strike, now entering its 8th week, has also begun to translate into a near term boost to volume.” We take this to mean that Cooper is selling to Goodyear’s customers, and investors seem to agree – Cooper stock has climbed
almost 50% since the strike began.

All of this confirms what reports from the picket line and good common sense tells us must be true: you can not build tires when your tire-builders are standing at the front gate of the plant.
Goodyear may have tires that we do not know about, but unfortunately for Goodyear, their dealers do not seem to know about them either. For more information on this and other investor concerns, please visit:

www.usw.org/goodyearalert