Goodyear, union reach tentative labor agreement

Dec. 22, 2006

Goodyear Tire & Rubber Co. has reached a tentative agreement with the United Steelworkers of America (USW) that supports Goodyear's strategy to significantly reduce costs and improve competitiveness in its North American operations.

"Our goal was always to reach a fair agreement that improves our ability to compete and win with customers," says Chairman, CEO and President Robert Keegan. "This agreement would accomplish that


The tentative agreement, which covers workers at 12 tire and engineered products plants in the United States, gives Goodyear the ability to reduce excess high-cost manufacturing capacity, reduce legacy costs, improve productivity and reduce labor costs consistent with the four-point cost reduction plan that was announced to investors in 2005. According to Goodyear, the tentative agreement:

* secures retiree medical benefits through an independently administered Voluntary Employees' Beneficiary Association (VEBA) to be launched with an up front $1 billion contribution from Goodyear to consist of $700 million in cash and up to $300 million in additional cash or common stock at the company's option. Subject to court and regulatory approvals, the VEBA would assume full responsibility for providing retiree medical benefits to all present and future Goodyear USW retirees;

* provides for the closing of the Tyler, Texas, facility after Dec. 31, 2007, which is consistent with Goodyear's previously announced plans to exit certain segments of the private label tire business;

* delivers substantial improvements in labor costs and productivity through redesign of incentive systems and immediate implementation of market-based wage and benefit levels for all new hires;

* improves job security and provides capital investments in USW plants of at least $550 million over the life of the agreement.

Goodyear will hold a conference call in January for investors, financial analysts and media to discuss specifics of the new contract if the tentative agreement is ratified by the USW membership.

The tentative agreement was endorsed by the USW's Goodyear Policy Committee, made up of local union leaders from the company's master contract facilities throughout the U.S. Members at these locations will vote at ratification meetings in their communities on December 28.

According to the USW, the ratification vote will be taken following informational meetings at each location. "A majority of the majority principle applies," which means that a majority of the locals as well as a majority of the overall membership must vote to accept the tentative agreement as the new contract.

The union says the agreement addresses three crucial areas of concern because, if ratified, it will accomplish the following:

* establish an innovative, company-financed trust of more than $1 billion that will secure medical and prescription drug benefits for current and future retirees;

* enhance the ability of USW-represented plants to meet the challenges of global competition by having Goodyear triple its capital investments to at least $550 million in those plants; and

* maintain affordable, high-quality medical and prescription drug coverage for active members and retirees.

"By securing solid medical and drug benefits for current members and retirees in the midst of today's health care crisis, our bargaining committee was able to drive the proverbial wolf away from the door for tens of thousands of retirees and thousands more workers who are nearing retirement," says USW Vice President Thomas Conway, who chaired the union's negotiations with Goodyear.

In addition, the union says the tentative agreement requires Goodyear to rescind its demand for immediate closure of its Tyler, Texas, plant, and instead provides for a one-year period of transition during which workers will have the opportunity to take advantage of sizeable retirement buyouts.

"Though we're not entirely happy with the outcome at Tyler, we were able to ensure that as long as Goodyear stays in the market for the tires built at Tyler, those tires will have to be produced at USW-represented plants in the U.S.," says Conway. "The company simply won't be able to outsource that work or service this market segment with imports from China or anywhere other than a USW facility."

"What we achieved would never have been possible if we hadn't struck," adds USW Executive Vice President Ron Hoover.

The 12 master contract plants and their workers covered by the tentative 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.