Goodyear is to spend US$500m building a new plant to supply North and Latin American consumer tyre customers and capitalise on anticipated growth for high value added products in the two regions.

The company is using healthy profits made last year to increase shareholder dividends, buy back stock and reduce debt.

Chairman and chief executive officer Richard Kramer, said: "This updated capital allocation plan for 2014-2016 reflects Goodyear’s commitment to balancing all our priorities – returning cash to shareholders, investing in high-return growth projects and achieving investment grade metrics to drive long-term shareholder value."

The new tyre plant will support Goodyear’s planned long term growth in high value added consumer replacement and original equipment market segments.

Kramer added: "Our investment supports another key element of our strategy – to focus on winning with consumers in profitable market segments.

"With growing consumer demand in North America and Latin America, the time is right to invest in additional manufacturing capacity to maintain Goodyear’s leading position and to grow earnings beyond 2016."

The new plant will have an initial capacity of about 6m tyres a year and this could be increased as demand increases. Site selection is under way. Production is expected to begin in the first half of 2017.

The company also reaffirmed its 2014-2016 financial targets which include segment operating income growth of between 10% and 15% a year and annual positive free cash flow from operations.

Goodyear also continues to expect a 2-3% increase in unit volumes for 2014 over 2013.