Goodyear Hits $100M Bump With ERP System

Computerworld - Goodyear Tire & Rubber Co. last week said it's still investigating what went wrong with its financial systems and caused a major accounting blowout at the company.
The Akron, Ohio-based tire maker added that it hasn't set a firm target date for completing a planned fix of the balky systems, which include a corporate accounting system based on SAP AG's ERP software plus a set of older applications that are used for intercompany billing.
Goodyear on Oct. 22 disclosed that it would have to restate its financial results back to 1998, partly because of financial errors resulting from a faulty implementation of the accounting system. It also cited processing malfunctions on the intercompany systems.
One thing is certain: Goodyear will take a big financial hit as a result of the system snafus. In a statement, the company said it expects to lower the net income it reported during the restatement period by as much as $100 million. In addition, the company postponed the release of its results for this year's third quarter.
The SAP-based ERP system was installed in 1999 and runs Goodyear's core accounting functions. Meanwhile, the intercompany billing systems handle internal transactions on purchases of raw materials made centrally for use throughout the company's global operations, according to a Goodyear spokesman.
Goodyear declined to make any of its IT managers available to comment about the matter. The company absolved SAP's software from any blame, saying that the problems stemmed from the way the applications were installed.
"It's important to note that we said the situation involved the implementation of the ERP [software] and did not say we had a problem with the software itself," the Goodyear spokesman said.
He added that company officials currently are "identifying where the errors were" in the ERP rollout and the internal billing systems so that fixes can be made and accounting procedures improved.
Goodyear got consulting help on the SAP project from PricewaterhouseCoopers and J.D. Power and Associates, according to the tire maker's spokesman. He said Goodyear isn't contemplating any legal actions against the consulting firms at this point.
Nor does Goodyear plan to make any management changes within its IT department pending the outcome of the ongoing internal review, the spokesman said. In addition, the company has no plans to replace the affected systems with new ones.
William Wohl, a spokesman for SAP America Inc. in Newtown Square, Pa., said Goodyear has been a customer since 1994 and described the relationship between the two companies as "very successful, strong and strategic." Wohl added that SAP is willing to help Goodyear resolve the problems, but the tire maker said it doesn't expect to need any assistance.
SAP's software is one of the most mature accounting applications on the market, said Karen Peterson, an analyst at Gartner Inc.
Noting that this is the biggest accounting systems failure she has heard of in recent years, Peterson said it underscores the need for users to fully test new ERP systems and carefully scrutinize the financial data they produce before going live with the software.

System Fallout Goodyear will restate its financial results for the years 1998 through 2002 and for the first half of this year. Up to $100 million in profits will be wiped off the company's books, although it said revenue won't be affected. The scheduled announcement of Goodyear's third-quarter results was delayed from Oct. 23 to mid-November.

Read more about ERP in Computerworld's ERP Topic Center.