AKRON (Sept. 30, 2009)—Goodyear likes the cost-savings aspects of its new four-year labor contract with the United Steelworkers as cost-saving, but it said that more importantly the agreement will change the way it runs its unionized tire plants in the U.S.
The contract, ratified Sept. 18, covers about 10,300 workers at seven Goodyear facilities. Workers at the company's Danville, Va., factory had voted the new deal down on Sept. 10, but employees at the remaining sites approved it over the following week.
Goodyear said the contract will save the company about $555 million over its term, including $340 million from local pre-bargaining agreements in Akron; Buffalo, N.Y.; Danville, Topeka, Kan.; and Union City, Tenn. Those savings will be realized through scheduling changes and staffing reductions, the Akron tire maker said.
About $215 million in cost reductions over the contract term will be via productivity upgrades, wage and benefit savings, flexibility changes and the transition to a defined contribution plan for pensions from a defined benefit plan.
Richard Kramer, the firm's chief operating officer and president of its North American Tire unit, said while the cost-savings are significant, the realities of today's tire industry and the global economic crisis required more than hitting a cost-cutting number.
The contract needed to address the improvement of Goodyear's “efficiency, flexibility and competitiveness in both the near-term and long-term,” driving working capital improvements and allowing for better responsiveness to customer needs, he said.
Some of the changes benefiting Goodyear include upgraded, more consistent output and individual performance standards; elimination of “grandfathering” wage rates when union workers voluntarily move to lower-paying jobs; increased cost-sharing for workers in their medical plan; 50-cent raises for newer workers only; a shift to a defined contribution pension plan; and the ability to make up to 600 additional buyouts at the protected plants.
The agreement will enable the company to “realize profitable growth by manufacturing tires in North America,” Kramer said.