CHARLOTTE, N.C.—Continental Tire North America Inc. is aiming to cut costs, production and employees at one plant and upgrade another in a restructuring of its U.S. tire operations.
Following through on a threat it made to the United Steelworkers in late November, Conti said Jan. 9 it will lay off 513 hourly and salaried employees, reduce passenger and light-truck tire manufacturing by 30 percent and slash $32 million in costs at its Charlotte factory. About 435 workers to be cut are members of United Steelworkers Local 850.
Three days later, the tire maker unveiled a plan to invest $60 million to $70 million in its non-union Mount Vernon, Ill., tire plant to improve efficiency and increase productivity. Included will be a combination of capital improvements and the restructuring of tire operations.
However, that plan includes a 10-percent reduction in wages for hourly employees, who also will have to contribute to the company´s health insurance program, which they did not do in the past. Salaried employees have had their pay reduced in recent years, the company said, and already make health insurance contributions.
Alan Hippe, president and CEO of the North American business, said both moves are being made to bring overall manufacturing costs in line with global competition.
In November, Conti said Charlotte workers needed to cut their wage and benefits package by 35 percent by January or staff reductions would be made. The suggested cuts would have trimmed the average plant worker´s salary and benefits package to $26 an hour, $18 in wages and $8 in benefits. Workers would have had the option to make adjustments to the proposal as long as the bottom line came out the same.
"Manufacturing costs in our Charlotte facility are higher than any other Continental tire plant worldwide, and we have been very clear from the start that we cannot continue in our current situation," according to Hippe.
Substantial cost reductions at the factory must be achieved to assure that it remained a valuable part of the company´s North American operations, he said.
Proposal draws heat
Company and USW officials are scheduled to meet Feb. 2 and 3 to discuss the reduction plan. The two sides are in the early rounds of negotiations on a new contract, which expires April 30.
Shortly after Conti announced its plans in Charlotte, officials at the USW´s headquarters in Pittsburgh sharply criticized Continental Tire North America managers, maintaining that they don´t understand how to compete in North America.
"Unlike successful companies, Continental never developed a rational marketing strategy nor made adequate investment in product research and development," charged Ron Hoover, executive vice president of the USW. "Instead of developing a constructive dialogue with its workers and their union, and pursuing new solutions, this company keeps repeating its mistakes while demanding labor concessions."
Conti´s plan calls for it to lay off 241 hourly workers in Charlotte by March 13 and another 194 on June 30. The plant will operate with about 573 employees thereafter.
Last June, Conti scaled back production at the factory by about 30 percent, citing high inventories and manufacturing costs.
Mark Cieslikowski, president of Local 850, said he wasn´t surprised when company officials made the announcement.
"They said they´d do it and they did it," he said. "But they also said they´d provide us with information letting us know what they base their costs on. They didn´t do that."
The legal counsel for Continental, Rick Holcomb, said the company has been providing the union "with a constant stream of documents and responses to some of their requests. We´ve given them about 10 boxes of documents. We believe it´s what they´re looking for."
Not everything, Cieslikowski countered. The USW would like to know where the firm came up with the $32 million figure it said it needs to cut. Two years earlier, he said, the figure was $18 million.
"I think they want to close the plant and move production to Brazil," where Conti is building a new tire factory, he said. "This has happened at plants in Germany and Scotland. (Workers at those) plants made concessions and the company still shut them down. They ask for concessions and offer no security. If they´re losing money it´s not because of our wages and benefits. Something else is causing it."
Holcomb said the two sides are $32 million apart presently and Conti has received no counter offers. "We understand they will make a proposal in February," he said.
Gaining competitive edge
Continental said its plan to invest between $60 million and $70 million at the Mount Vernon site is aimed at ensuring long-term viability for the plant and its workers. The program will improve efficiency and increase productivity through a combination of capital improvements and restructuring of tire operations.
Hippe said the plan will ensure the firm´s future success in Mount Vernon. By restructuring tire operations, the company believes it can bring overall manufacturing costs in line with global competition.
Capital improvements will turn it into a modern, state-of-the-art facility, he said, pointing out that no other Conti plant in the U.S. has received a capital investment on this scale.
The investment will include the installation and operation of a new tandem mixer, the only one of its kind in the U.S., which will increase productivity by making rubber mixing a more efficient and quicker process, the company said.
Even after the hourly workers´ pay is cut, their wages will remain among the highest for those working in southern Illinois.
"We are asking that sacrifices be made, but we are also investing in the future of the Mount Vernon facility," Hippe said.
Conti´s objective in North America is to reduce financial losses while expanding the firm´s market position, he said.