Union ratifies agreement with Goodyear
The 86-day strike is officially over. All 12 local unions voted by more than a two-to-one margin to ratify the tentative agreement reached a week ago between the United Steelworkers of America (USW) and Goodyear Tire & Rubber Co.
More than 10,000 of the more than 14,000 striking USW-represented members in the United States voted. Both a majority of the locals as well as a majority of the overall membership voted to accept the tentative agreement as the new contract.
"Reaching agreement on a contract that competitively positions Goodyear for the future is a huge achievement for everyone involved in the negotiation process," says Robert Keegan, Goodyear's chairman, CEO and president. "The end result is Goodyear will be a stronger company, a stronger employer and a stronger overall global competitor."
"It took a strike, but we achieved a fair and equitable contract that protects quality health care for active and retired members," says Ron Hoover, USW executive vice president. "And by winning major capital investment expenditures, it secures our jobs for the future."
Goodyear says it expects to realize substantial cost savings as a result of the master contract. Provisions of the three-year master contract, which affects 16 plants in North America, give the company the ability to achieve up to $610 million in cost savings over its term, and $300 million a year in ongoing savings.
According to Goodyear, compared with 2006 pre-strike levels, savings are expected to total $70 million in 2007, $240 million in 2008 and $300 million in 2009.
The agreement provides for the following:
* the transfer of responsibility for all current and future retiree health care liabilities for Goodyear's USW workforce to a VEBA trust, reducing a significant portion of the company's legacy costs. Goodyear's up-front contribution to the trust of $1 billion will consist of at least $700 million in cash with the balance in additional cash or common stock at the company's option.
According to the USW, the company-financed trust will secure medical and prescription drug benefits for current and future retirees. Future contributions will include diverted COLA (cost of living allowances) payments and profit-sharing funds. "Affordable, high quality medical and prescription drug coverage for its active and retired membership was also maintained."
Goodyear will reduce OPEB expenses annually by an estimated $110 million and improve cash flows by $145 million annually compared with 2006. After the VEBA is established, Goodyear will eliminate all current and future OPEB liability related to the USW work force, which represents more than half of the company's projected benefit obligation for post-retirement benefits.
* investment of $550 million over three years in the company's USW facilities to make them more efficient and productive in manufacturing high-value-added branded products.
"To secure jobs, we had to obtain enough money to keep our plants globally competitive," says Tom Conway, USW International vice president.
* a reduction in high-cost manufacturing capacity. The company will close its Tyler, Texas, plant after Dec. 31, 2007, thereby eliminating nine million units of high-cost tire capacity and yielding approximately $50 million in annual savings.
The one-year period of transition gives the Tyler plant workers "the opportunity to take advantage of sizeable retirement buyouts," according to the union.
"It's a bittersweet outcome," says Kevin Johnsen, USW-Goodyear contract coordinator. "We wanted to win Tyler protected status like the other plants, but we only got it for 2007. Still, the company has committed to building the Tyler ticket in USW plants as long as the company stays in those markets."
Goodyear previously announced a goal to eliminate 15 to 20 million units of high-cost tire capacity by 2008. With the Tyler closure, Goodyear will have eliminated 14 million units toward this goal.
* implement a new, lower-cost wage and benefit standard for new hires during the first three years of employment. The expected combined benefits realized from the new wage structure and additional productivity initiatives is expected to save the company $300 million over the three-year contract. Compared to 2006 rates, the ongoing annual savings will total $155 million by 2009.
Also as part of the contract, Goodyear has agreed to profit sharing of up to $25 million in 2009 and up to $30 million in 2010, and restoration of pension service resulting in a cost of approximately $13 million annually.
The 12 master contract plants and their workers covered by the agreement are: Akron, Ohio; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; Lincoln, Neb.; Marysville, Ohio; St. Marys, Ohio; Sun Prairie, Wis.; Topeka, Kan.; Tyler, Texas; and Union City, Tenn.
Goodyear will address the specifics of the new contract in a conference call for investors, financial analysts and media in January. The timing of that call will be announced at a later date.
The new contract covers tire and engineered product plants in: Akron, St. Marys and Marysville, Ohio; Gadsden, Ala.; Buffalo, New York; Lincoln, Nebraska; Topeka, Kansas; Fayetteville, North Carolina; Danville, Virginia; Tyler, Texas; Sun Prairie, Wisconsin; and, Union City, Tennessee.
Negotiations between the USW and Goodyear began in June of this year. Citing a lack of progress in bargaining talks, 15,000 USW members in 16 plants throughout the U.S. and Canada struck on October 5. The master contract covers workers at 12 tire and engineered products factories in the U.S.
Members of the four Ontario plants in Canada who struck in support of the master contract in the U.S. -- but were not covered by it -- are voting on their own proposal, which was negotiated separately. The plants include a warehouse and retreading facility in Toronto, and engineered products plants in Collingwood and Owen Sound, Ontario.
The USW represents more than 850,000 members in the U.S. and Canada. Some 70,000 are employed in the tire, rubber and plastics industry.