The second priority is to focus on the business.
“COVID is something clearly unprecedented,” Kramer said. That’s in part because of the speed and ferocity with which it is hitting and also in part because of a lack of clarity on its depth and duration, he said.
The Akron tire maker has made difficult but appropriate decisions, he said, to deal with the situation — with an eye to resuming normal operations as soon as possible.
“It’s professional in the sense that it’s business, but it’s also very personal in the sense that these are our associates having been impacted by something none of us created,” Kramer said. “It’s very personal in that regard.”
Goodyear has gone through a lot of challenges in its 125-year history, including the Great Depression, the Great Recession, business cycles and more, Kramer said.
“This has been nothing that we’ve experienced, that most businesses have experienced anything like this,” he said. While he and others saw the early spread of the virus in China, Kramer said they had no idea that it would spread as fast and as hard as it has in the rest of the world.
COVID-19 has created what is called a “demand shock,” Kramer said. “Demand is evaporating.”
Put in other words, people and automakers aren’t buying tires.
Most automakers have shut down production, meaning they don’t need to buy the original equipment tires Goodyear and others make.
Consumer confidence has also dropped significantly, Kramer said.
While China appears to be bouncing back — Goodyear has a new tire factory there — people in the United States, Europe and elsewhere are now sheltering in place, he said.
“That means demand is going down,” he said.
Goodyear, which last month announced it was temporarily closing its manufacturing plants through early April, has extended the closure.
Industry analysts are telling Goodyear that auto production will be down 20% this year, and that replacement tire sales could drop 15%, Kramer said.
“To put that in perspective, that’s worse than the Great Recession for us to deal with,” he said.
“So, this is what’s happening. We’re looking at this and embracing it with realism, sort of staring in the face of the uncertainty and accepting what we see coming. And frankly, acting very fast to be able to deal with it.”
As a result, Goodyear needs to carefully manage its cash while planning on eventually resuming normal operations, he said.
Goodyear has almost its entire Akron workforce working from home. Kramer said he held a virtual town hall meeting with employees to talk about the company’s decisions to deal with the virus and business downturn.
“The simple way to think about our business is, the sales are going down but the bills are coming due for the materials that we needed to build the tires for which the sales aren’t going to happen,” he said. “April is going to be difficult. The timing of our cash out is a lot more than the timing of our cash in. ... We’re dealing with that by taking the factories down.”
Goodyear’s business is seasonal and the company was building inventory for a period when sales were going to drop, he said.
The company is tightening up on all cost and cash outflows like other businesses are, Kramer said, and that includes payroll costs.
“We have a shared sacrifice approach to all of this,” he said.
That sacrifice involves pay cuts and temporary unpaid furloughs that will ideally go on no longer than the end of June, he said.
“We did not stop any benefits,” Kramer said.
“For the majority of our associates, what we tried to do is to have those associates have access to income, or income replacement, that being from state and federal programs, that is equal to at least two-thirds of their pay,” Kramer said. “That is how we have approached this to work through this difficult situation.”
Similar approaches have been taken at all of Goodyear’s non-U.S. operations as well, he said.
Goodyear cannot yet disclose specifically how much money all of these decisions is intended to save, Kramer said. All of the company’s steps are necessary, he said.
“Cash is king again,” Kramer said. “Our strategy is to be flexible, our goal is to focus on cash.”
As business comes back, Goodyear will bring back employees from furlough, Kramer said.
The world is going to get through the pandemic, Kramer said.
Goodyear eventually will reopen its business in a way that’s very safe for its associates, he said.
Parts of Goodyear’s operations remain open, he said. For one, the company is an integral part in keeping the trucking industry moving, he said. “We’ve got 2,300 commercial truck tire centers around the U.S. Those things are open. ... Our retail stores are still open. To keep our country moving is an essential business.”
People are sheltering in place to slow the spread of the virus, Kramer said. The U.S. government has enacted a large fiscal stimulus package. And people in health care are developing tests, treatments and vaccines, he said.
“The spirit of our society, we generally don’t go backwards,” Kramer said. “I personally don’t expect that to happen here. I think we have to work through this. But I also think we can’t lose the optimism that says we’re going to work through this. We’re going to have solutions. ... We also know pandemics end. We’ll get on the other side of this thing.”