Goodyear Tire & Rubber Co (NASDAQ:GT) And Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG) To Exit Alliance Facilitated By Dunlop

Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG) and Goodyear Tire & Rubber Co (NASDAQ:GT) have decided to terminate their partnership.

The companies have been in ties since the turn of the century. Their partnership has been in place for more than a decade, but they have been having some unresolved issues for almost two years. The decision to end the partnership was reached over the arbitration process that was initiated by Goodyear. The disagreements between the two companies were as based on revenue issues.

Goodyear Tire & Rubber Co (NASDAQ:GT) is the third largest tire manufacturing company while Sumitomo Rubber is ranked 6th in the tire industry. Google claims that its 2015 and 2016 financial projections will not be disrupted by the separation incidence. Sumitomo Rubber, on the other hand, claims that it is still analyzing the effects of the situation.

The two companies agreed that Goodyear should pay $271 million to Sumitomo Rubber on an upfront basis. It is also expected to clear an already existing debt of roughly $55 million in the same company within the next three years.

Sumitomo Rubber will receive 75% ownership in their joint business in the United States while Goodyear is expected to take over 25% of their European venture. The two firms two operations in Japan. They will split the two evenly with each firm taking complete ownership of one of the businesses.

Goodyear and Sumitomo Rubbers will share the rights to the Dunlop brand. However, the rights will be distributed on the basis of their operating regions. Sumitomo Rubbers will own the rights to the Dunlop brand for all the new vehicles produced in Japan including motorcycles, while Goodyear will procure the rights for tire replacement as well as new vehicles made by car manufacturers that are not Japanese.

Goodyear decided to seek arbitration for dissolution of their alliancein February 2014 after learning that Sumitomo Rubbers was involved in activities that were not promoting better performance for the partnership. Regardless, Sumitomo rubbers denied the allegations.

About the Author

Terrel is US Markets Daily’s business news reporter. She joined US Markets Daily after five years as a print reporter.

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