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January 10, 2006 01:00 AM

Titan-Goodyear deal in the books at last

Brad Dawson
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    FREEPORT, Ill.—Titan International Inc. has completed its purchase of Goodyear´s North American farm tire business for $100 million, following the approval of a new union contract at Goodyear´s Freeport plant.

    The sale, pending since February, includes the farm tire factory, property and equipment in Freeport as well as inventories. It also includes a licensing deal for Titan to pay a royalty to make and sell Goodyear- and Kelly-brand farm tires in North America.

    Goodyear will continue to make and sell farm tires in Latin America, Europe, Asia and Africa, a company spokesman said.

    Members of United Steelworkers Local 745 overwhelmingly ratified a new five-year contract with farm and industrial tire and wheel maker Titan on Dec. 21, paving the way for the company´s long-delayed purchase of Goodyear´s agricultural tire business in North America.

    USW members staffing Titan´s Des Moines, Iowa, farm tire factory also approved a new extension deal that will run concurrent with the Freeport contract, with more than 95 percent of the nearly 500 workers there voting yes.

    The deadline on the deal between Goodyear and Titan was extended several times during the year, primarily because Titan and the USW couldn´t work out their own pact to satisfy the successorship clause in the union´s contract with Goodyear.

    A tentative pact finally was reached Nov. 23. Local 745´s 740 members approved the contract—which runs through Nov. 19, 2010—with 78.1 percent in favor. The contracts took effect Jan. 1.

    Goodyear expects to report a loss of about $65 million on the divestiture. The Akron-based tire manufacturer said it expects the sale to reduce revenue in its North American Tire segment by about $200 million annually, but it also said the change will eliminate the need for more investment in the farm tire business.

    Titan expects its 2006 sales to increase by about $250 million as a result of the deal. The Freeport plant has a rated capacity of 10,000 farm, all-terrain vehicle and some light truck tires per day. The facility will continue to make ATV tires under contract to Goodyear, the Goodyear spokesman said.

    "Closing the acquisition has been a long haul, and with this acquisition the Goodyear brand will again be the No. 1 brand in North American farm tires, replacing Firestone," said Maurice Taylor Jr., Titan chairman and CEO, without disclosing market share estimates.

    Titan began manufacturing Jan. 3 in Freeport and will make "further announcements" about the plant in the first quarter.

    Taylor said he was pleased by the results of the vote. He also gave credit to his employees not only for getting the Goodyear deal done, but also for Titan´s recent resurgence in the industry.

    "The real story is the people who work for me," he said. "It´s their hard work, discipline and willpower. They understand the global way of doing business."

    Labor successes

    Local 745 President Steve Vanderheyden said it has been difficult for him and the membership in Freeport to imagine working for a different employer. The average service and age of a worker there is 29 years and 50 years old, respectively.

    The 41-year-old plant has a long history with Goodyear—it´s one of the tire maker´s original Kelly-Springfield Tire Co. factories.

    "People here were sensitive about Titan´s track record with organized labor," Vanderheyden said. "But the terms of the contract are an improvement over what we thought we had in store with Goodyear in the future. As difficult as the process was, we were willing to see what opportunities can be created by our new owner."

    Titan´s icy relationship with the USW is well documented—in no place more so than Des Moines. Local 164 went on strike in 1998 and stayed on the picket line for 40 months, making it the longest strike in U.S. tire and rubber industry history.

    The local negotiated with Titan to coincide with the Freeport deal, said Local 164 President Mike Mathis, who said it´s nice to get any contract issues out of the way until 2010. The contract reached in 2001 wasn´t to lapse until December 2006.

    "We feel it´s a good deal, and now we can focus on building tires," Mathis said. "Having the Freeport facility on board gives the company nice flexibility in the market, and I think we´ll work well together."

    Negotiators for both locals will meet together with Titan management annually to discuss interim contract and employment issues at the sites, he said.

    Other highlights of the contracts include:

    * wage and pension increases;

    * guarantee of no plant closure during the agreements;

    * no layoffs for two years and no more than a 10-percent reduction in production jobs;

    * preferential hire and successorship language;

    * maintenance of current health care plans;

    * product protection language guaranteeing that products sold by Titan must be manufactured in Des Moines or Freeport;

    * a Voluntary Employee Beneficiary Association account for the company to make $3 million in annual contributions for future retirees´ medical expenses at both plants:

    * neutrality and card check recognition; and

    * a company commitment to make capital expenditures necessary to maintain and improve the plants´ competitiveness.

    The Freeport workers will be phased into a schedule of defined wage increases—with cost-of-living allowances being gradually phased out—and shifted over to the Steelworkers Pension Trust for pension benefits. The wage increases for the term of the contracts will be about $3 per hour.

    Employees with 20 or more years of experience with Goodyear also will be able to receive full retirement benefits after 10 years of employment with Titan, Vanderheyden said.

    Lisa Hockensmith, Tire Business staff, contributed to this report.

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