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Goodyear Leaving Jamaica?

After four decades, Goodyear JA Ltd, is setting to pack its bags to leave Jamaica.

The company has decided to end its run in Jamaica, saying this week it will wind up the company once shareholders approve the move. The move comes 11 years after the company stopped making tyres here at its plant in St Thomas, choosing instead to import from connected operations for resale.

The vote is set for December 19 at an extraordinary meeting in Kingston. Shareholders will be asked to approve Anura Jayatillake and Audley Gordon of Deloitte TouchTohmatsu as joint liquidators at a fee of $1.5 million plus "costs, charges and expenses".

2007 fire

Goodyear Jamaica has been struggling to regain its footing following a January 2007 fire that erased its inventory. Equity in the company is now valued at $467.9 million, down from $471 million at December 2007. Its stock market value as at Tuesday was $178.2 million or $3 per share. The stock was trading at $4 and above a month ago.

The fire actually gutted the warehouse of the tyre company's sole distribution agent at the time, Tyre Sales and Services Limited - a company owned by Neal & Massy Holdings of Trinidad - and while Goodyear has since contracted a new partner, the interruption of business and reformulation of its distribution network has taken heavy toll on its bottom line. The company has not recovered since.

The slump

Losses, however, were down to $2.98 million in the nine-month period to September 2008, com-pared to a $9.2 million deficit in the comparative 2007 period. The third quarter contributing $3.9 million to the slump in each of the two periods.

Goodyear's general manager Steven Miller, citing disclosure rules, was unwilling to offer much detail on the winding up of the company, whose main role has been marketing and oversight of regional markets.

"At the extraordinary general meeting, shareholders will vote on a resolution to liquidate Goodyear Jamaica Limited's assets," said Steven Miller, general manager of Goodyear Jamaica Limited. "Once the requisite number or percentage of shareholders vote in favour of liquidation, the business of the company changes and a liquidator is named who will collect all moneys owed to the company and pay off all debts owed by the company and distribute the remainder to the shareholders."

Goodyear's assets totalled $686 million at September 30 - down from $806 million - while liabilities amounted to $218 million. Fixed assets were valued at $9.4 million, intangibles at $10.8 million, and retirement benefits at $78.4 million.

The company's balance sheet was most heavily weighted in liquid assets of $587.8 billion, for which no break-out was provided in the unaudited nine-month accounts. Miller gave no specific reason for seeking voluntary liquidation, but Goodyear has been faced with year-over-year decrease in profits.

Goodyear spent $115 million on marketing and administration, up $20 million year on year. The result was operating loss of $4.5 million, but even this outcome was tempered by savings on cost of sales, resulting in a two third cut in operating loss from $13.8 million in the 2007 period.

Revenue in the third quarter dropped off by 10 per cent, from $327.6 million to $292 million. The fall off in profitability factored in the decision by Goodyear to quit Jamaica after 40 years, but it was not, as Miller noted, the only consideration. "The decline in company profit is a data point ... but there are multiple data points that helped to drive the board to its recommendation," he said.

Goodyear Jamaica is a subsidiary of Goodyear Tire & Rubber Company based in the United States. The parent holds 35.64 million or 60 per cent of the 59.4 million issued shares.