Bridgestone/Firestone North American Tire L.L.C. has reached a long-term contract to buy power for its Oklahoma City tire plant, an agreement needed if the factory is to get capital upgrades.
The tire maker signed a 15-year deal with PowerSmith Cogeneration L.P. for the passenger and light truck tire facility to buy steam used in the tire making and plant heating processes.
``We believe the agreement is in everyone's best interest,'' said Barry Owens, Oklahoma City plant manager. ``It's an important step for us as we work to make this plant competitive in the face of fierce global competition. Now that the agreement is done, we can get back to what we do best, which is making world-class tires.''
Negotiations with PowerSmith had dragged on for some time, and also had to take a backseat while the steam provider worked out a dispute earlier this year with Oklahoma Gas and Electric Co. Those two parties haggled for more than a year over whether OG&E would have to continue to buy electricity from the power plant.
There even was talk that if PowerSmith lost the contract to sell power to OG&E, it would stop making the low-cost steam. Had that scenario played out, the future of the Bridgestone/Firestone factory could have been in jeopardy, as the company estimated its energy bill would jump by $5 million to $7 million a year.
Once PowerSmith and OG&E worked out their differences, the steam provider and Bridgestone/Firestone were able to focus on reaching a long-term agreement.
``It's important to the future of the facility to have a handle on power costs,'' a BFS spokesman said. ``Without an agreement, in some ways you're flying blind. It's a significant cost at the plant. It would be difficult for the factory to be successful without an agreement.''
Now the tire maker can decide what type of upgrades to make at the facility, which was built in 1969. It employs about 1,800 with the capacity to make 43,500 tires daily.
Those units, however, are largely 13- to 15-inch tires, according to the spokes-man. He said the company has been looking to add equipment to make high-performance, larger-diameter tires, as the market has been moving toward 17-, 18- and even 19-inch tires.
Some new molds have been brought into the Oklahoma City plant, but the company is in its midterm budgeting process and no final decisions have been made, the spokesman said. ``It's being discussed and debated, and decisions will be made.''
The agreement with PowerSmith is the second piece of good news that lean toward the factory getting the investments it needs to stay competitive.
In June, Oklahoma Gov. Brad Henry signed into law the Quality Investment Act. Under the legislation, the factory will qualify for $5 million in state financial assistance if it makes a $50 million investment during the next five years. The Greater Oklahoma Chamber of Commerce estimates the facility has an annual impact of $800 million on the local economy.
The BFS spokesman said the legislation is a good sign, as states often bend over backward to bring in new companies and plants but do little to help the companies with operations already in place.
``Without the bill and the power agreement, we wouldn't even be talking about (a plant upgrade),'' he said.
The last part of the equation that likely will have to be answered before final decisions are made on future investment in Oklahoma City is negotiations on a master contract with the United Steelworkers of America. Goodyear and Michelin North America Inc. both have reached pacts with the union, while BFS and the USWA haven't negotiated since November.
The BFS spokesman said the company wants to get back to the bargaining table and get issues worked out. ``Uncertainty makes planning very difficult,'' he said. ``We have the power agreement and the retooling bill. There's a third question mark, and that's the labor situation.''