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December 29, 2006 01:00 AM

Union approves Goodyear pact by 2-1 margin; will return to work Jan. 2

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    AKRON (Dec. 29) — Striking Goodyear employees in the U.S. will return to work Jan. 2 after approving a new three-year contract by a 2 to 1 margin.

    The United Steelworkers said the contract with the Akron-based tire maker was approved by an overall majority of the membership as well as a majority of the locals from 12 plants.

    The workers had been on strike since Oct. 5. Workers at four Canadian plants also will vote on a separate contract proposal to end their strike.

    "It took a strike, but we achieved a fair and equitable contract that protects quality health care for active and retired members," said USW Executive Vice President Ron Hoover. "And by winning major capital investment expenditures, it secures our jobs for the future."

    Goodyear also hailed the contract, saying it could result in cost savings of up to $610 million over the term of the contract and $300 million a year in ongoing savings.

    Goodyear said that compared with 2006 pre-strike levels, savings are expected to total $70 million in 2007, $240 million in 2008 and $300 million in 2009.

    The company said it will host a conference call this month to discuss the contract.

    In the pact, Goodyear agreed to hold off closing its Tyler, Texas, plant for a year, during which time workers can take advantage of retirement buyouts, the union said. The facility can close after Dec. 31, 2007.

    "Though we´re not entirely happy with the outcome at Tyler, we were able to ensure that as long as Goodyear stays in the market for the tires built at Tyler, those tires will have to be produced at USW-represented plants in the U.S.," Tom Conway, USW vice president and the chair of the union´s Goodyear negotiations, said as union members began voting Dec. 28.

    The Tyler closing is linked to Goodyear´s June decision to exit parts of its private label business. The firm already charged $107 million relating to the closure against its third quarter results.

    The Tyler plant had a capacity of about 25,000 passenger and light truck tires a day, and its closing will eliminate about 1,100 jobs and save the company about $50 million a year after taxes.

    Also as part of the pact, Goodyear will secure retiree medical benefits through an independently administered voluntary employees´ beneficiary association (VEBA) with a $1 billion contribution from the company. Of that contribution, $700 million will be in cash and $300 million in additional cash or common stock at the company´s option.

    The VEBA will assume full responsibility for providing retiree medical benefits to all present and future Goodyear/USW retirees, subject to court and regulatory approval, Goodyear said.

    Goodyear initially offered to contribute $660 million to the trust fund, which the union said was not enough.

    The pact also provides capital investments in USW-represented plants of at least $550 million over the life of the three-year contract. The union said that figure is three times Goodyear´s recent capital improvements.

    The Akron-based tire maker´s incentive systems also will be redesigned, and the firm will implement market-based wage and benefit levels for all new hires.

    Goodyear also agreed to restore pension service, which will cost the company about $13 million annually. Goodyear has agreed to profit sharing of up to $25 million in 2009 and $30 million in 2010.

    The 12 plants covered by the contract are based in Akron; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; Lincoln, Neb.; Marysville, Ohio; St. Marys, Ohio; Sun Prairie, Wis.; Topeka, Kan.; Tyler; and Union City, Tenn.

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