OPELIKA, Ala.—Workers at Michelin North America Inc.´s BFGoodrich tire plant in Opelika weren´t surprised about the company´s decision to reduce production there, but it still was a shock.
The BFG tire manufacturing unit announced June 11 it will reduce tire production by 30 to 40 percent at the plant beginning in the fourth quarter. Between 30 and 40 percent of the site´s employees will be laid off indefinitely, a Michelin spokeswoman said.
The Opelika plant employs more than 1,300 salaried and hourly workers. It has a capacity of about 8 million tire units per year, according to Rubber & Plastics News´ 2005 Global Tire Report.
"The leadership here has tried to prepare everyone for this type of situation," said Tim Williams, vice president of United Steelworkers Local 753, which represents more than 1,200 hourly workers in Opelika. "It´s not like the market turned just this week. We´ve seen the trends, and the company hasn´t hesitated to say they´re not in the business of losing money."
BFG cited overcapacity in the mass-market passenger tire segment in North America as the impetus for the reductions. The segment has been shrinking over the past several years and is experiencing intense cost pressure because of increased imports from competition in lower-cost countries, the company said.
The 1.65 million-sq.-ft. Opelika plant manufactures BFGoodrich, Uniroyal, private and associate brand mass-market passenger and light truck tires, primarily for the U.S. market.
The changes are being made to adjust capacity and are not targeting any particular brand, the spokeswoman said. The company chose Opelika for the cutbacks because products specific to the reduction primarily are made there, she said.
The reasons for the cuts are similar to those given when Michelin announced in February it was closing its BFG tire plant in Kitchener, Ontario. The company has to keep examining the market and make any changes to align with demand, the spokeswoman said. "It was a difficult decision to close the Kitchener plant, but the market continues to shrink."
Looking for upgrades
At the time of the Kitchener decision, BFG said any necessary production would be shifted to its U.S. sites in Opelika; Tuscaloosa, Ala.; and Fort Wayne, Ind. The Kitchener plant was scheduled to close July 22, the day the current BFG/United Steelworkers contracts in the U.S. and Canada expired.
Local 753 has about 150 members of retirement age, and union officials would like to work out an improved incentive package that would allow them to make a retirement choice.
That would prevent some of the less experienced workers from being laid off later this year. "Some of those members wouldn´t be working much longer anyway," he said. "But the deal has to be right for them."
The Opelika announcement came 11 days after the USW selected BFG as its bargaining target for the 2006 master contract season. Contracts with Bridgestone/Firestone and Goodyear-which approved a day-to-day contract extension with the USW on July 18-were due to expire July 22 as well. BFG wanted to get notice to its affected employees as quickly as possible, the Michelin spokeswoman said.
Ron Hoover, USW executive vice president and head of the union´s Rubber/Plastics Industry Conference, said negotiators will continue to seek improvements for the Opelika site in contract talks.
"This is not a productivity issue," Hoover said. "It´s about marketing, and that´s why we´re working to secure the long-term viability of the Opelika plant by negotiating capital investment expenditures that will enable Opelika to upgrade the products it produces."
Michelin committed to and delivered on $150 million in capital expenditures at the four BFG plants since 2004. The company spokeswoman said the company would continue to invest in North America, but that "in this competitive market we´ve had to make some tough decisions."
Williams echoed Hoover in saying productivity never has been a problem in Opelika, and added the facility has one of the best cost-per-unit rates in the company. The real problem is BFG can´t in turn sell those tires for very much money, he said.
But the work force definitely has the capability to build the higher-ticket items Michelin believes it can make and sell profitably, Williams said. "We´d like to see a flood of higher-end tires here."
Hoover said he´d like to see all the BFG unit´s products made in USW-represented facilities. But the glut of imports from low-cost locations such as China has resulted in several companies abandoning lower-margin tire production in North American facilities, he said. Most of those moves directly affect USW members.
In fact, the Opelika site is the latest in a growing line of North American tire plants facing cutbacks or outright closure.
In addition to BFG´s moves in Kitchener and Opelika, Goodyear announced last month it would cut production of private label tires by about a third-making up about $300 million in annual sales and capacity of about 8 million units.
All the plants making Goodyear´s private label tires are unionized, and workers at four of those plants are covered by the master contract being negotiated this year.
Continental Tire North America Inc. suspended tire production at its Charlotte, N.C., tire plant on July 7, and BFS said it plans to close its Oklahoma City tire factory by year-end. Workers at those plants are represented by the USW as well.
The specter of closed plants and reduced production only gives the union more determination to gain additional job security in contract negotiations, Hoover said. "Opelika is central in these discussions," he said. "As we speak, we will spend a lot of time talking about the future."
If the North American passenger tire segment does re-expand, the company has the option of recalling workers and making more capacity adjustments, the Michelin spokeswoman said. "We´ll keep looking at the market and see how it evolves," she said.