Goodyear (GT) has a few flat tires that need fixing, contends noted activist investor Elliott Management.
The firm launched a new campaign against the storied tire maker on Thursday, citing poor margin performance versus rivals, weak board oversight of management, and ill-timed tire distribution deals.
Elliott is pushing for a sale or other action on Goodyear’s 1,000-plus retail stores and the installation of five new board members. The names of those board nominees could not be learned.
Elliott thinks Goodyear could be worth $32 a share under its plan. Goodyear stock rose as much as 15% on Thursday morning to $13.50 on news of Elliott’s involvement.
A Goodyear spokesperson didn’t return Yahoo Finance’s request for comment.
Sources familiar with the matter tell Yahoo Finance that Elliott is hopeful a board refresh would lead to a management overhaul. The activist firm is also unhappy with the likely cost of a new docu-series celebrating Goodyear’s 125th anniversary given the lagging stock price and profit margins, the sources say.
These sources added that the company could even be spending too much to operate the legendary Goodyear blimp, though the firm isn’t advocating that Goodyear stop marketing via the highly visible blimp.
The talks with Goodyear are in the preliminary stages, the sources said.
The activist campaign comes amid several challenging quarters as the global economy slows, inflation remains stubbornly high, and consumers push back on tire price hikes.
In late October 2022, Goodyear revealed third quarter tire unit volumes fell 3% from the prior fiscal quarter. Replacement tire volume dropped 9%, underperforming a 3.5% decline for the overall industry. Adjusted net income declined 43% year on year to $116 million while earnings came in shy of analyst estimates.
Goodyear shares lost about 53% in 2022.
The company saw sales only rise by 0.7% in the first quarter of 2023, and Goodyear lost $101 million in the quarter.
Prior to today’s pop, shares of Goodyear had fallen about 64% over the past five years.