Goodyear to stop making tyres in Malaysia, close 52-year old factory

After celebrating its 125^th anniversary last August, Goodyear seemed upbeat about its business future in the Asia Pacific region. It saw the continuous rise of the middle class and the increase of ultra high-net-worth individuals in China and the Asia Pacific resulting in increasing demand for motor vehicles – and therefore an equal growth in demand for tyres.

Optimism in Asia Pacific – excluding Malaysia
However, it seems that the optimistic picture largely refers to China, the largest car market in the world. By the end of the year, it was talking about a ‘rationalization plan’ for the region which would see cutting of 700 jobs and disposal of around 100 retail stores and fleet locations as well as 9 warehouse locations. This follows similar cost-cutting moves for the Middle East, Africa and Europe.

The company said the approved plan that is part of its broader restructuring effort would be completed by the end of 2024. These actions are expected to fundamentally streamline Goodyear’s business, improve its competitive position and drive growth. In the Asia Pacific region, profitability in its Australia and New Zealand operations is expected to improve.

Factory closure in Malaysia
The rationalisation plan for the Asia Pacific region did not mention factory closures but it would appear that the factory in Malaysia will be closed as part of that plan. This was announced by the President of Goodyear Asia Pacific, Nathaniel Madarang, in a recent communication to company employees.

Referring to the ‘Goodyear Forward’ transformation program that is expected to deliver annualised cost reductions of US$1 billion by 2025, he said that the company ‘made the difficult but necessary decision to close our manufacturing plant in Shah Alam, Malaysia, effective June 30 2024, with closure expected to be complete by the end of the year’.

Mr. Madarang said that the move will affect approximately 550 workers in the Malaysian operations, ie loss of jobs. “We are committed to treating our associates with respect and transparency during this process,” he said.

One of early factories in Shah Alam
The Goodyear Malaysia factory was among the first factories to be built in the then newly-opened Shah Alam industrial zone in Selangor in 1972. The tyremaker was among the companies which recognised the future potential of the growing car market which was boosted in 1967 when the government promoted local assembly of vehicles. It offered lower tax rates as an incentive which would allow locally-assembled models to be cheaper than those imported in completely built-up (CBU) form. Furthermore, use of locally-made products was also encouraged to help with the industrialisation of the country.

The industrial estate at Shah Alam saw the first vehicle assembly plants being set up and for practical reasons, suppliers like Goodyear also built their factories nearby for quicker deliveries. In fact, the Goodyear factory was located just 2.5 kms from the first cluster of assembly plants such as Swedish Motor Assemblies (the first one), Assembly Services (then Champion Motors) and Associated Motor Industries.

Goodyear, which had been doing business in Malaya from as far back as 1908, began its major investment in Malaysia by forming a joint venture with PERNAS for the establishment of Goodyear Malaysia. The factory was officially opened in September 1972 and quickly became an Original Equipment (OE) supplier to many of the carmakers that were  assembling their vehicles locally.

Pioneer in introducing new tyre technologies
Over the years, it introduced new tyres with the latest technologies; for example, its steel-belted tyres were the first such tyres made in Malaysia. With the tyremaker’s strong presence in international motorsports, it was not surprising that its Malaysian affiliate also gave equally strong support to local motorsport. It provided generous sponsorship of events at the Bati Tiga racing circuit which was just across the highway from the factory and was also a founder member of the Shah Alam Motor Racing Association.

With its global reputation, Goodyear tyres were popular in the market and were chosen as the OE tyres when the first Malaysian National Car was produced by Proton. Today, they are also chosen by some carmakers for original fitment and a wide range is offered in the replacement market as well.

Smaller volume a disadvantage
While the factory produced a wide range of tyres in earlier years, the number diminished in the 21st century as competition grew and higher volumes were necessary to achieve greater economies of scale that would push production costs down. This was possible only in the bigger factories in markets like China and Thailand and Goodyear, like other global companies, found it more cost-effective to import some tyres to Malaysia than to make them locally.

With the increasing number of vehicle models and types, there was also an explosion of sizes and a small factory like the one in Malaysia could not efficiently produce all of them, so some sizes had also to be imported.

So it has probably reached a point where the volume at the 52-year old factory is just too low to allow for competitive pricing. This is also made tougher with the influx of many low-cost brands from other Asian countries which offer cheaper tyres. A Goodyear executive once said that Goodyear has certain standards with regards to quality and safety and cannot compromise on them just to make tyres cheaper. “Consumers want cheaper tyres but there is also a minimum cost required to make safe tyres and we won’t go below that just to be able to offer cheaper tyres,” he explained.

With the closure of the Goodyear Malaysia factory, there remain two global brands still making tyres in Malaysia – Continental and Toyo. There are also other smaller factories which make other brands (mostly low-cost or commercial products) around the country. Goodyear tyres won’t disappear from the market, though, as the company will import them from its other factories in Asia. It actually won’t be a lot different from the situation today since many of the tyres are already being imported, with only a small number actually made locally.