Can tire maker Goodyear
The largest North American tire company will bestow its winged boot upon a series of GPS devices, some of which will feature Bluetooth capabilities and MSN Direct from Microsoft
Although the Goodyear name holds a lot of cachet with motorheads -- particularly NASCAR fans -- that won't necessarily spur sales of GPS systems. With raw material costs for making tires rising, Goodyear is undoubtedly looking at the fat margins top GPS maker Garmin
The market researchers at RNCOS see the GPS market hitting $30 billion this year, though the greatest gains may come from the people-tracking and handset segments. That bodes well for Garmin, which just unveiled a handheld and wristwatch version of its GPS system at this year's CES. But fat profits engender lots of competition, and Garmin faces challenges from TomTom and Magellan.
Considering the cutthroat nature of the GPS business, Goodyear's entrance here makes me wonder what the tire maker really hopes to gain. Its GPS will be made by a company called The NCC, which makes electrical devices for Stanley Works
Goodyear has been doing well lately by focusing on making tires. It's been increasing its profits by selling off non-core businesses and concentrating on putting out high-margin tires. While sales growth rates lag the S&P, the tire maker also reports skimpy returns on assets, which are still saddled by mountains of debt.
Looking at how entrenched Garmin and TomTom are in this industry, this appears to be a vainglorious attempt to divert attention from Goodyear's completing its turnaround story, just as some scary trends are emerging in that effort.
The Goodyear name has a lot of brand value. Let's just hope the company doesn't get lost by going off in new directions.
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Fool contributor Rich Duprey owns shares of Goodyear, but he holds no financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.