CHARLOTTE, N.C.-Continental Tire North America Inc.´s spanking new tire factory in Camacari, Brazil, is open, operating and casting a long, ominous shadow over the North American market.
The new plant is slated to pick up some of the tire production lost at Conti´s Charlotte plant, where the company and the United Steelworkers union have been embroiled in heated contract bargaining. The two sides have made little headway since they began negotiating in October.
In fact, the Steelworkers on April 7 authorized a strike at the facility in case the union determines it´s the only recourse available to members of Local 850 when the current pact ends April 30. The strike proposal passed by a 78-percent margin, according to Mark Cieslikowski, president of USW Local 850, which represents workers at the Charlotte plant.
Conti wants $32 million in cost savings at the factory to bring it in line with its low-cost plants globally. The union maintains the firm doesn´t need to cut that much. So far, Conti has presented six proposals to the USW. All have been rejected. The union has countered with three plans. All of those have been turned down.
The USW and Conti planned to meet April 13-14 in hopes of closing the gap before the pact runs out. But neither side is particularly optimistic. The last sessions, held April 5-6, did not go well, according to Rick Holcomb, Conti´s legal counsel. He said he´s discouraged by the lack of progress and that it´s "unlikely we´ll reach an agreement by April 30."
But, he added, "we´re prepared to meet every day until then to get this resolved."
Conti began cutting its payroll at the Charlotte plant in mid-March when it chopped 140 jobs from its books. Another round of layoffs is planned for mid-May, this one involving about 170 employees. About 50 salaried positions also could be eliminated in July.
And, if an agreement isn´t reached with the union, tire production will be suspended Sept. 15 and 478 hourly and salaried positions will be axed.
The first round of layoffs resulted in production being trimmed to 18,000 tires a day from 25,000 at the factory. That figure will drop to 12,000 tires a day if the firm makes the layoffs in May.
That´s where the Brazilian plant becomes a factor. Continental A.G., the parent of Continental Tire North America, opened the tire factory April 5 primarily to supply the North American market.
It plans to turn out 9,000 passenger tires a day at the site by the end of 2006 and then increase production to 14,000 daily in the first half of 2007. The plant has the capacity to produce 6 million passenger and 700,000 commercial vehicle units yearly.
Production of commercial vehicle tires will get under way in July, with an estimated daily output of about 1,000 tires daily by year-end and as many as 1,700 units a day by the end of 2007.
It took 18 months to construct the 1.1 million-sq.-ft. factory, at a cost of about $260 million. It employs about 282, according to Conti, which expects the plant´s work force to grow to about 700 by year-end. That figure should climb to about 900 during 2007.
Close to 200 workers have gone through a training program at Conti locations outside Brazil, primarily in Portugal and Germany, as well as in the U.S., the Czech Republic and Slovakia, said Christian Meinecke, manager of the tire plant project.
That isn´t particularly good news for workers at the Charlotte factory. But they aren´t surprised by it either.
Cieslikowski has said throughout contract negotiations that Conti´s plan is to shift as much tire production as possible out of the U.S. to cheaper sites elsewhere.
He said the union has presented ideas to the company on ways to cut costs by using greater efficiencies at the Charlotte factory, but the company has paid little attention to the proposals.
While Conti could end tire production in Charlotte in September, the plant will remain open with around 200 workers handling rubber mixing, calendering, puncture sealant and warehousing operations.