AKRON — Goodyear next year will freeze its defined benefit pension plans for employees and replace them with 401(k) savings accounts as part of several moves to save about $100 million on pension obligations and $525 million on other post-retirement benefits.
The Akron-based tire maker said the action is part of its plan to cut costs by more than $1 billion by the end of 2008. The changes will be phased in over a two-year period, the firm said, with most benefit plan alterations effective next year and many pension plan changes starting in 2009.
Goodyear expects the moves to save the company $80 million to $90 million this year, $100 million to $110 million in 2008 and $80 million to $90 million in 2009 and later. The company will take a one-time charge of $65 million for the actions in the first quarter.
Among its benefit plan changes, Goodyear plans to hike the amount current and future salaried retirees contribute to the cost of their medical benefits; redesign retiree medical benefit plans to minimize the cost impact on premiums; close the firm´s Medicare supplement to new entrants; and discontinue company-paid life insurance for salaried retirees.
On the pension plan side, Goodyear plans to freeze the current salaried defined pension plans as of Dec. 31, 2008; replace the defined benefit pension plans with 401(k) accounts with "varying levels of company contributions" for employees, beginning Jan. 1, 2009; and introduce company-matching contributions for the salaried 401(k) savings plan at 50 percent of the first 4 percent of annual pay, beginning Jan. 1, 2009.