Systemic Reforms Underway at Goodyear India Following Tyre Pilferage Probe

An investigation report submitted by Ernst & Young LLP into the alleged case of tyre inventory discrepancies at Goodyear India's Ballabgarh Plant (Faridabad) has identified the primary cause to be potential theft of tyres in bulk by contractual workers involved in security, warehousing, and loading operations, acting in collusion. Some pilferage of tyres may have occurred through excess loading in shipments involving both an employee and contractual workers, Goodyear informed while sharing the findings of the report in a regulatory filing. 

Goodyear's management on its part claims to have  taken cognizance of the findings and initiated appropriate legal and disciplinary actions against those involved. Proactive measures, including a site security assessment and tightened controls, have been implemented. "Further enhancements to internal controls and processes are under implementation' . The company did not respond to the email sent by Autocar Professional seeking comments on the development.

The discovery of the shortage came to light in November 2024 during a physical verification process at the Ballabgarh facility. Goodyear identified a net physical shortage of 4,571 tyres  during physical verification at its Ballabgarh Plant, amounting to approx. Rs 3.91 crore . This contrasted sharply with a previous verification in March 2024, which showed no significant discrepancies between recorded and actual stock. Following this discovery, Ernst & Young LLP was brought in to assist with a fact-finding review.  

Two Primary Modus Operandi Identified

The investigation by Ernst & Young  revealed two main methods used for the pilferage of tyres:

(Modus Operandi 1: Potential theft of tyres in bulk)  

1) During review, identified suspicious conversations shared between a third party loading supervisor and warehouse workers indicating that truck-load of tyres were potentially siphoned from Ballabgarh Plant in select unidentified trucks without any dispatch records maintained at the warehouse, material gate or weighbridge through collusion amongst third party warehouse workers, loading manpower, security guards and unidentified external individuals.

2) Potential quantum and period for bulk theft of tyres: Based on review of suspicious conversations, identified a total of 4,057 tyres mentioned against 20 dates between July 2024 to December 2024. These conversations also indicated the SKU wise count of tires for identified 20 dates. 

3) Manipulation of Gate records: One (1) third-party security personnel admitted to have been offered kickbacks by the aforementioned third-party loading supervisor for non-recording of truck details carrying stolen tyres in security records.   

(Modus operandi 2: Theft/pilferage through potential excess loading of tyres in trucks)  

1) During review, another modus operandi was identified for pilferage of tyres from Ballabgarh plant, wherein excess tyres (as compared to invoiced quantity) were loaded in select trucks and were potentially siphoned during transit. 

2) Spike in overweight dispatches during July 2024 – November 2024: As a practice, a tolerance limit of 1.3% for over-weight dispatches was allowed at Ballabgarh plant. In case the truck load exceeded the tolerance limit, the Quality Assurance team of Goodyear undertook a study to ascertain the reasons for over-weight and subsequent reloading of trucks was undertaken in presence of security, if required. Based on data analytics performed on dispatch records for July 2023 to November 2024, identified 2,383 instances of overweight dispatches, out of which 50% of the total overweight trucks were dispatched between July 2024 to November 2024. Further, 15% of the total overweight trucks were dispatched to Ambala warehouse, wherein the over-weighment ranged from 5% -11% of standard weight. During the review, it was identified that these overweight dispatches were allowed to Ambala warehouse without quality study and verification by security due to shortage of storage space at Ballabgarh plant which was caused due to high inventory levels.  

3) Instructions from third-party warehouse vendors to allow overweight dispatches: One (1) Quality Assurance employee admitted to having received instructions from an employee of the third party warehouse vendor to ignore the over-weight trucks and allow them to be dispatched without quality study. He further opined that over-weighment was due to excess loading of 5-6 tyres in these select trucks which were dispatched to Goodyear warehouses and were subsequently pilfered in-transit during the period May 2024 to August 2024. However, the employee stated that he had physically not witnessed any excess loading and could not provide any further details such as truck numbers, dates or total quantity of such excess tyres which might have been pilfered.

Potential misrepresentation of rejected quantities of tyres by Quality Inspector during pre-dispatch inspection (PDI):

1. Increase in quantity of quality rejections: Per defined process, the Quality team inspects the tyres prior to any dispatch failing which the tyres are rejected and blocked for any further dispatch without re-work. Review of PDI rejection records from January 2023 to December 2024 indicated an increase of rejections in 2024 as compared to 2023.

2. Kickbacks for increasing quantity of quality rejected tyres: The aforementioned Quality Assurance employee admitted to having received kickbacks from the same employee of the third party warehouse vendor for inflating the quantity of rejected tyres at the time of PDI. He also admitted that the rejected quantity was inflated only in the daily quality report whereas there were no rejections physically. He informed that the rejections were inflated through collusion with select third party quality inspectors and opined that the rejections might have been inflated to manage the physical shortage of tyres maintained by the third party warehouse vendor.

Gaps identified in the Production and Physical verification process:

1. Irregularities in production handover process: During process walkthroughs, it was informed that finished tyres are handed over by Production to Warehouse department basis manual production load slips prepared in triplicate by respective departments post independent count of tyres. During review, identified discrepancies in manual load slips indicating that tyres were handed over without independent verification. Further, multiple employees and third party contractual workers had also admitted that the defined process for handover of finished tyres was not adhered to by production and warehouse departments.

2. Gaps in production MIS vis-à-vis production recorded in SAP: During process walkthroughs, it was informed that production records were maintained manually. Further, it was informed that production undertaken during the shutdown period was not recorded in the Production MIS due to which variances were identified in production recorded in SAP. During review, noted multiple spreadsheets with different production numbers for the same period which did not match the Production MIS shared during review.  Further, during interviews, employees could not provide any explanation nor any records for actual production undertaken at the plant during the shutdown-startup period. The identified variances could not be validated or quantified due to non-availability of system logs and inaccuracy/non-reliability of manual records.

3. Gaps identified in physical verification records of March 2024: During review, noted certain gaps in physical verification records such as missing signatures and non-verification on select counting tags.

The review highlighted significant lapses in the production and verification controls, particularly in the handover process, documentation accuracy, and physical inventory practices. The reliance on manual records, lack of independent verification, and inconsistencies between MIS and SAP data have collectively led to a breakdown in traceability and audit reliability. These gaps not only raise concerns about data integrity and operational compliance but also increase the risk of inventory misstatements and process inefficiencies. 

Looking ahead, sustained process vulnerabilities of this nature could undermine operational transparency, distort inventory valuations, and pose long-term challenges to regulatory confidence and strategic decision-making.