Goodyear-Cooper Tire Merger Heats Up Competition Among Auto Service Chains

The announced combination of Goodyear and Cooper Tire, the largest and fifth-largest tire manufacturers in North America, is set to not only increase competition with foreign and domestic rivals, but also raise the bar in the lucrative aftermarket retail services sector.

In acknowledging the complementary business models, organizational structures and distribution channels the $2.8 billion acquisition will unlock, the two Ohio-based manufacturers said the combined company would have nearly 60 factories with over 70,000 employees and 2,500 service centers and do more than $17 billion in annual sales.

“The transaction will expand Goodyear’s product offering by combining two portfolios of complementary brands,” the companies said in a joint statement released Monday (Feb. 22). It will also create a stronger U.S.-based manufacturer with increased presence in distribution and retail channels while combining both companies’ strengths in the highly profitable light truck and SUV product segments.

“The addition of Cooper’s complementary tire product portfolio and highly capable manufacturing assets, coupled with Goodyear’s technology and industry leading distribution, provides the combined company with opportunities for improved cost efficiency and a broader offering for both companies’ retailer networks. We are confident this combination will enable us to provide enhanced service for our customers and consumers while delivering value for shareholders,” said Goodyear Chairman and CEO Richard Kramer.

OEMs and Aftermarket

As it stands, the two companies compete globally to sell tires to auto manufacturers around the world. In addition they also compete largely domestically in a robust aftermarket replacement tire and auto service segment.

Two weeks ago Goodyear acknowledged the ongoing economic uncertainty and challenges of the pandemic when it reported a 2 percent drop in fourth quarter sales, along with a 5 percent decline in total tire volume, and a 7 percent decline in replacement tire shipments.

At the same time, Goodyear said its revenue per tire and original equipment unit volume both increased by 3 percent last quarter.

In announcing its own fourth-quarter results on Monday, Cooper Tire said its global unit volume decreased 9.8 percent and its sales also fell about 3 percent compared to the fourth quarter of 2019.

The Tire And Auto Service Business

By strengthening its leadership position in the global tire industry, Goodyear said it is looking to improve both its manufacturing and distribution businesses, and plans to use the expected financial benefits to increase its investments in new mobility and fleet service options.

Goodyear has already embraced the buy now, pay later (BNPL) trend and alternative financing strategies by offering Affirm and PayPal through its existing retail locations, service centers and website.

Although both firms are already major players in the domestic auto service sector, the Goodyear-Cooper combo will face the same list of formidable competitors, most of whom are also wholesale customers. Among those it will have to fight for market share include Walmart and its 2,500 auto care centers, Firestone’s 1,700 Complete Auto Care centers, and Icahn Automotive which runs over 2,000 locations on a variety of brands, including Pep Boys, AAMCO and Auto Plus.

There’s also a number of major international brands to contend with, including France’s Michelin, Japan’s Bridgestone and several up-and-coming Chinese brands that are looking to grab market share.

Pending regulatory approval, the companies expect the deal to close in the second half of 2021.