AKRON—The longer the United Steelworkers strike against Goodyear goes on, the costlier it will be for both sides, according to industry analysts.
For the company, the losses will be in terms of lost revenue, profits and-quite possibly-precious market share, as roughly 63 percent of its U.S. and Canadian tire production is at stake. And for the 15,000 USW members striking 16 Goodyear facilities in the U.S. and Canada, each day on the picket line means lost wages and benefits they may never recover.
Saul Ludwig, a securities analyst with KeyBanc Capital Markets, estimates Goodyear will lose $2 million in profits for each day of the strike. "The longer the strike lasts, the bigger that number becomes," he said.
Another analyst, John Murphy of Merrill Lynch, projects Goodyear could lose as much as $38 million in revenue for each day the striking plants aren´t operating.
"Although we do not know how long the union will strike, given the magnitude of the daily losses, we believe almost any amount of time will be detrimental for Goodyear´s profitability," he wrote in a note to investors. "We don´t believe that Goodyear is prepared to replace all union laborers but may be able to keep production running at minimal levels."
Murphy also downgraded Goodyear´s stock to "sell" from "neutral."
The strike begins
The USW began its strike Oct. 5 at eight tire and four engineered products plants in the U.S., and at four other sites in Canada. The tire factories represent estimated daily capacity of 206,000 units. As of press time, no further negotiations were scheduled, though both sides said the lines of communication remain open.
Union officials said Goodyear gave them no other choice but to strike after lengthy master contract negotiations left the two sides far apart on many issues, especially job security and retiree health care benefits. Goodyear´s offers had declined to give full plant protection to all U.S. sites, and the union said it won´t give in on the potential for closure at one or more plants.
The USW had focused its attention on Goodyear after reaching a three-year agreement in August with Michelin North America Inc.´s BFGoodrich tire manufacturing unit, the designated industry bargaining target. Talks have been on hold with the third tire maker involved in the master contract negotiating process, Bridgestone/Firestone, pending the outcome of the Goodyear situation.
Since the strike, Goodyear said its contingency plans are "working fine," according to a company spokesman. "We´re continuing to serve all of our customers," he said, including tires for three NASCAR and two other racing series.
The firm said it will meet requirements through available inventory, imports, manufacturing at non-affected plants and production at affected factories via the use of salaried workers.
Goodyear is making product at all of the tire and engineered goods factories on strike, the spokesman said. He wouldn´t give any indication as to the level of production being maintained.
He said the firm´s two non-union tire factories in North America-in Lawton, Okla., and Napanee, Ontario-are running "full out." Goodyear´s tire plants in Medicine Hat, Alberta, and Valleyfield, Quebec, which are unionized but not covered under the master pact, also continue to operate. Combined, the four facilities have a daily capacity of about 123,000 units.
The Goodyear spokesman also confirmed that the company has laid off 300 workers temporarily at its Asheboro, N.C., steel tire cord facility because the firm has plenty of wire on hand to meet its current production needs.
Workers at Asheboro are represented by the USW, but just signed their first-ever contract this past summer and are not in the master contract.
A USW spokesman said the union is getting high levels of community support at the various locations, with people donating food, money and offering to walk the picket line. "People in the communities are perceiving that this is more than just a labor-management battle," he said.
He also is skeptical about how much manufacturing Goodyear will be able to maintain at the striking plants, saying reports are that there are "not too many trucks leaving the plants with products."
And if the Asheboro layoffs are indeed because of production needs-rather than retribution against another USW local-that would indicate Goodyear isn´t producing many tires, the Steelworkers spokesman said.
The only plant where workers are crossing the picket line in any significant numbers, he said, is the Fayetteville, N.C., tire factory, in a right-to-work state. About three dozen, mostly non-dues-paying union members are reporting to work.
Ludwig predicted Goodyear has enough inventory and production to meet its initial needs, but it´s unknown how long that will last. He said salaried employees probably will only be able to replace a small piece of production. "If you´ve got 15,000 workers out, you can´t replace 15,000 workers," Ludwig said.
Any production from Lawton, Napanee and overseas plants likely will be focused "on where their needs are the greatest," the analyst said.
The road ahead
David Meyer, an associate professor of management at the University of Akron, said he was surprised the USW pulled the trigger on the strike, rather than keep working under the contract extension in place. The union probably decided, "We´ll draw a line in the sand now while we still have a beach," he said.
Meyer said in the past Goodyear had tried to have a good relationship with workers, but the firm has made enough mistakes so it can´t have the best relationship. "When management makes a mistake, it comes out of the workers´ pockets," he said. "It´s not coming out of the management´s pockets."
And now that no negotiations are taking place, he said it gets harder to float proposals from one side to the other, as both management and the union become locked into inflexible bargaining positions.
On Oct. 6, the day after the strike began, Jon Rich, Goodyear president of North American Tire, said in a letter to employees that the firm would continue to serve its customers and continue bargaining.
"We remain hopeful that we will arrive at a resolution," Rich wrote. "But I assure everyone that we will not agree to a contract that puts us at a disadvantage vs. our competitors."
He said much is at stake in the negotiations. "We´re fighting to preserve the future of the last major American tire manufacturer," he wrote. "We will not sit idly by and allow foreign competition to gain the upper hand."
Likewise, the USW spokesman said it is vital that concessions made in 2003 negotiations-at a time when Goodyear was in dire financial shape-must not be forgotten. Under terms of that contract, Goodyear closed its tire plant in Huntsville, Ala.
"We feel we were very innovative and collaborative when they were at their darkest hour," he said. "We did a lot of work and made a lot of sacrifices."
Now, three years later and with Goodyear in improving financial health, he said, workers see others being rewarded, including creditors, stock holders and company executives.
"Everyone´s sacrifices and work are being acknowledged, but with our folks, the firm´s just asking for more cuts," the USW spokesman said. "We´re not coming to talk as long as there is a laundry list of additional cuts and plant closings."
Lisa Hockensmith, Tire Business staff, contributed to this report.