NASHVILLE, Tenn.-Bridgestone/Firestone´s notice of "potential plant closure" for its Oklahoma City tire plant isn´t a bargaining ploy, the company´s vice president of manufacturing said.
This despite the fact that the announcement came less than two months before the start of master contract negotiations with the United Steelworkers union. Bridge- stone/Firestone said it may close the 37-year-old tire plant by the end of the year because it feels it will be "extremely difficult, if not impossible" to make the factory competitive again.
The Oklahoma City facility employs more than 1,400-1,200 of them USW members-and produces 43,500 tires a day, mainly low-end passenger and light truck units. The plant has been protected from closing under the current contract, but that pact expires in July.
"This is not a bargaining ploy; we haven´t asked for anything as of yet," said Steve Brooks, vice president of manufacturing for the firm´s Bridgestone/Firestone North American Tire L.L.C. unit. "We could have waited until master bargaining, but that´s not the intent of the notice. We´d like to see this addressed as soon as possible."
Millions in losses
Instead, Brooks said the notice is reflective of the plant´s financial performance. He pointed to losses in 2005 of $40 million, a $17.4 million shortfall in this year´s first quarter and projected red ink of $60 million this year if BFS continues on the current production schedule at the facility.
It´s been "quite awhile" since the Oklahoma City factory made money, he said, even though the company invested more than $40 million at the plant since 2002. That capital spending was to skew production away from 13- and 14-inch tires more toward 15- and 16-inch lines, but the market keeps going for even larger rim sizes than that, Brooks said.
Other factors hurting the plant are the impact of firms that import the tire sizes made at Oklahoma City to gain entry to the U.S. market and the increased benefit and legacy costs faced by many domestic manufacturers.
In addition, while BFS has been able to raise prices of some of its higher-end tire lines to offset the rising cost of raw materials, the market won´t absorb price hikes in the lower-end segments, Brooks said.
The BFS executive noted the financial situation of the plant has been highlighted the past couple of years as the company changed its methodology in how it determines the performance of each facility. It now does a profit-and-loss statement for individual plants, rather than lumping them all together. "That really gives a visibility into what´s going on," he said.
And try as it might, the company hasn´t been able to come up with a workable scenario for Oklahoma City to turn a profit. Late last year, it even turned down $1 million it was eligible for in state funding-based on the investments since 2002-because it wasn´t sure of the facility´s future, according to Brooks.
"The way we see it, we just don´t see a good business model for the plant," he said.
Even a joint labor/management team that has worked aggressively the past several years to improve safety, quality and productivity hasn´t been able to keep up with market forces, as Oklahoma City remains the firm´s highest-cost plant in the U.S., Brooks said. "Even with the improvements that have been made, the impact has been marginal."
The United Steelworkers union has sent a number of detailed information requests to the company to help the USW "evaluate if there is a true need for the company to close Oklahoma City," said a spokesman at USW headquarters in Pittsburgh.
Once the information is handed over, the union will evaluate it before responding, he said.
The union also expects the Oklahoma City situation to be an integral part of master contract talks, he said, because it is part of the broader issue of tire companies´ commitment to North American production.
"We are concerned with job security and companies´ willingness to invest in plants," the spokesman said. "Without high-margin products, it´s hard to be competitive."
Employees were disappointed but not necessarily surprised by the announcement, said Jim Cassie, president of Local 998, which represents hourly workers at the facility. "They feel they were not given a chance, that the company turned its back on them," he said. "They know if they´re not on a level playing field, they can´t compete."
Cassie said the plant has an excellent work force, but that the facility always has been hurt by the low-end product mix, while BFS has directed more investment toward plants in Mexico and Aiken, S.C. "We feel we haven´t been given the proper arena to have a chance," he said.
Neither Cassie nor Brooks wanted to speculate on the chances of saving the operation.
"I don´t have a crystal ball, but if all the people go in with the intent to negotiate, there´s a chance," Cassie said.
Brooks said the company will negotiate with the union in good faith. "It´s not just a plant; it´s people," he said. "I won´t put odds on something where you´re talking about people´s lives. We must let it run its course."
He added that if the plant does close, the lines now made in Oklahoma City mostly will be transferred to other Bridgestone operations in the U.S. and around the world, with a smaller portion outsourced to other companies.