Dissolution of Global Alliance With Sumitomo Rubber Industries

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Dissolution of Global Alliance With Sumitomo Rubber Industries

DISSOLUTION OF GLOBAL ALLIANCE WITH SUMITOMO RUBBER INDUSTRIES

On June 4, 2015, we entered into a Framework Agreement (the “Agreement”) with Sumitomo Rubber Industries, Ltd. (“SRI”). Pursuant to the terms and subject to the conditions set forth in the Agreement, we and SRI have agreed to dissolve the global alliance between the two companies.

The Agreement provides that: (1) we will acquire SRI’s 25% interest in Goodyear Dunlop Tires Europe B.V. (“GDTE”) and SRI’s 75% interest in Nippon Goodyear Ltd. (“NGY”); (2) we will sell to SRI our 75% interest in Goodyear Dunlop Tires North America, Ltd. (“GDTNA”), as well as the Huntsville, Alabama test track used by GDTNA, and our 25% interest in Dunlop Goodyear Tires Ltd. (“DGT”); (3) we will acquire control of the Dunlop-related trademarks for tire-related businesses in North America but will grant SRI an exclusive license to develop, manufacture and sell Dunlop tires for motorcycles and for Japanese original equipment manufacturers operating in North America; and (4) SRI will obtain exclusive rights to sell Dunlop-brand tires in those countries that were previously non-exclusive under the global alliance, including Russia, Turkey and certain countries in Africa.

We will pay SRI a net amount of approximately $271 million upon closing of the transaction. In addition, we will deliver a promissory note to GDTNA: (1) in an initial principal amount of approximately $55 million, (2) with a maturity date three years following the date of dissolution, and (3) at an interest rate of LIBOR plus 0.1%, which initial principal amount is 25% of the outstanding amount of an intercompany loan originally made in connection with the closure of GDTNA’s manufacturing facility in Huntsville, Alabama in 2003.

The Agreement also provides that we will liquidate a technology joint venture and a purchasing joint venture and distribute the remaining assets and liabilities of those entities to us and SRI in accordance with our respective ownership interests in those entities, and that we and SRI will conduct an orderly sale of the SRI common stock held by us and the Goodyear common stock held by SRI.

We expect the transaction to close in the fourth quarter of 2015. The closing of the transaction is subject to the receipt of antitrust and other governmental and third party approvals and other customary closing conditions, including SRI’s completion of a labor agreement with the United Steelworkers union for GDTNA’s Tonawanda, New York manufacturing facility.

The assets and liabilities of GDTNA, the Huntsville, Alabama test track, and our investment in DGT have been classified as held for sale as of June 30, 2015.  The carrying amount of the net assets at June 30, 2015 was $15 million. The carrying amount of major assets and liabilities related to GDTNA included in our North America business unit at June 30, 2015 consisted of $127 million of property, plant and equipment, $38 million of inventories, $26 million of accounts receivable, $11 million of goodwill and intangible assets, $71 million in compensation and benefit liabilities, $66 million of accounts payable, and $66 million of other liabilities. The carrying amount of our investment in DGT included in our Asia Pacific business unit is $11 million.

Upon classifying the assets and liabilities related to GDTNA and our investment in DGT as held for sale, we evaluated the sale of these entities both quantitatively and qualitatively and concluded that individually and in the aggregate, the disposals did not represent a strategic shift that has, or will have, a major effect on our operations and financial results, and, accordingly, do not qualify as discontinued operations. We also concluded that neither GDTNA nor DGT were individually significant components of our operations.