Goodyear urged to pay lease based on current market rates

The National Development Co. (NDC) wants Goodyear Philippines to pay a lease based on market rates for the 18-hectare government-owned property it is occupying, Trade and Industry Secretary Peter B. Favila said yesterday.

Favila who is also the chairman of NDC, said that the NDC has asked Goodyear to formally give its position about the new lease agreement instead of relaying its position through the media.

Last month, Goodyear Tire Management Company (Shanghai) Ltd. Asia-Pacific region president Pierre E. Cohade said that Goodyear has no plans to leave the Philippines even as the American tire firm continues to negotiate with the NDC for the extension of Goodyear’s lease on its Las Piñas manufacturing site.

Cohade, who visited the Philippines to celebrate Goodyear’s 50th year in the country, had expressed optimism that ongoing negotiations for the renewal of the lease on the 18-hectare Las Piñas property would reach a positive conclusion.

However, Cohade admitted that the prolonged negotiations is "sending a wrong signal to foreign investors" especially at a time when the Philippines needs to attract more foreign investments.

"It is in the interest of the Philippine government to quickly settle this matter because it is giving the wrong signal to foreign investors," Cohalde said.

Cohade and Goodyear Philippines president David Joseph Morin stressed that Goodyear’s 50 years of operation in the Philippines has resulted in tangible financial benefit to the country.

In the past 10 years alone Cohade pointed out, Goodyear has contributed P3.3 billion in salaries to its associates.

The American tire firm has also paid P2.7 billion in taxes and has bought P13 billion worth of raw materials from its suppliers. Goodyear’s local manufacturing operations in the past 10 years have also generated P4 billion in exports, Cohade said.

While Goodyear has no expansion plans for its Philippine operations, Cohade assured that it is committed to serving its domestic market and supplying its export market.

Negotiations for the renewal of Goodyear’s lease with NDC has been going on for the past two years Morin admitted, and Goodyear, in fact, is operating without a long-term lease.

Goodyear is leasing NDC’s 18-hectare Las Piñas lot which has an attractive 300-meter frontage.

At an estimated P20,000 per square meter, the Goodyear property could command P3.6 billion if it is sold to real estate developers.

Goodyear’s 25-year lease with the NDC has expired and Goodyear Philippines has been renegotiating a new lease agreement. Cohade hinted that NDC is asking for a higher rental.

Renewing the lease for the government for another 25 years is not expected to bring in as much revenue as an outright sale. Sources compute that based on a net present value, a 25-year lease would only earn less than P1 billion for the government.

On the other hand, an outright sale of the property could fetch P3.6 billion.

However, the government would not get the entire P3.6 billion because the Goodyear property is a 60-40 joint venture between the NDC and Goodyear, with NDC owning 60 percent and Goodyear 40 percent.

Goodyear actually owned the property in the past. However, because of expiration of the Laurel-Langley Agreement, the property had to be nationalized and government entered into a 60-40 joint venture with Goodyear to develop the property.