A United States District Court judge has approved Goodyear Tire & Rubber Co.'s Voluntary Employees' Beneficiary Association (VEBA) trust. Goodyear will make a $1 billion cash contribution to the trust to provide health care benefits to current and future retirees who are part of the United Steelworkers (USW).
The one-time contribution will be made initially from existing cash reserves and available credit lines.
"Gaining court approval for the VEBA is a win-win for Goodyear and for our current and future USW retirees," says Goodyear Chairman Robert J. Keegan.
"This agreement both protects retiree benefits for years to come and removes a significant legacy obligation from our North American business."
Goodyear's obligations for providing USW retiree health care will be transferred to the VEBA.
"Creation of the VEBA will result in annual legacy cost savings of approximately $100 million a year and an approximate $130 million annual improvement in cash flow for the company compared to 2007."
Once the required legal process is complete, Goodyear says it will eliminate approximately $1.2 billion "of liabilities for current and future post-employment health care benefits from its balance sheet. The company expects no significant gain or loss at settlement."
It is anticipated that the legal process will be complete by the end of the third quarter of 2008, provided no appeals are filed.
