Contrarian Corpus
activist full deck initial thesis
2023-05-11 · 41 pages

The Goodyear Tire & Rubber Company GT

N 5 Narrative
V 4 Visual
C 4 Craft
Original source ↗

The three reasons

  1. 1

    Retail stores alone could be worth nearly Goodyear's entire market capitalization

  2. 2

    Operating margin of 5.1% vs 10.7% peer average — gap has widened, not closed

  3. 3

    CEO missed 2016 Investor Day $3B target by ~70%; margin promises repeatedly broken

Primary demands

  • Appoint five new independent directors identified by Elliott with automotive and operational experience
  • Monetize Goodyear's ~715 Company-owned consumer retail stores via sale to a focused, well-capitalized buyer
  • Form an Operational Review Committee to close the margin gap vs. Michelin and Bridgestone
  • Conduct a management review and consider leadership change
  • Use retail sale proceeds to de-lever the balance sheet

KPIs cited

CY2022 adjusted operating margin
Goodyear 5.1% vs peer average 10.7% (Pirelli 14.8%, Michelin 11.9%, Bridgestone 11.7%)
Operating margin gap vs Michelin/Bridgestone
Widened from (1.0)% in 2016 to (7.0)% in 2023E
10-year cumulative TSR underperformance
(208) vs S&P 500; (156) vs 2021 proxy peers; (332) over current CEO tenure
US replacement volume share
21% #1 (Michelin 15%, Bridgestone 14%, Continental 8%)
SKU count
376 SKUs — ~2x Bridgestone's 200 and Michelin's 150
SG&A reduction since 2016
Goodyear only (128)bps vs Michelin (369)bps and Bridgestone (242)bps
Channel cost / TireHub drag
Sell-out ASP +38% vs sell-in +24% since 2016 — ~$400M lost profit / ~205bps
Company-owned retail footprint
~1,025 global stores; ~715 consumer retail generating ~$1.5B revenue and ~$195M EBITDA
Retail store valuation
12.9x public peer / 14.6x precedent TEV/EBITDA multiples imply $2.4B net proceeds
Invested capital vs NOPAT 2016-2022
Invested capital +46% while NOPAT declined 42%; Michelin +38%/+26%, Bridgestone +38%/+7%
2016 Investor Day target
$3B segment operating income by 2020; 2020 actual ($14M); 2022 only $1.3B
Margin upside bridge
+385bps = 114bps SG&A + 201bps go-to-market + 70bps brand/SKU
Management incentive payout
~115% annual payout ratio over last three years despite poor performance

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (6)

Notes

Strong example of a fully-branded activist campaign — 'Accelerating Goodyear' wordmark echoes Goodyear's winged-foot logo in yellow/blue, with companion microsite (AcceleratingGT.com). Cover features a Goodyear-liveried race car. SCQA structure is tight: Market Leader / Poor Performance / Accelerating Goodyear tri-column (p6) then four numbered grievances (p17). Rhetoric relies heavily on quoting the CEO and former CFO verbatim to document repeatedly-broken margin promises (p29). Ex-employee and ex-competitor quotes reinforce operational critique. Elliott signals breadth of diligence (90+ former-employee interviews, ops consultant, customer surveys, shareholder survey). PDF has watermark '10XEBITDA.com' — indicates this copy was redistributed via a third-party repository. Campaign outcome (not assessed at extraction): CEO Kramer announced retirement Jan 2024; Elliott secured board refresh and retail strategic review — widely regarded as a win.