PITTSBURGH—There will be at least three years of labor peace among the three largest tire manufacturers, thanks to new labor deals with the United Steelworkers.
The union has agreed to new labor deals with Goodyear, Bridgestone Americas Inc. and Michelin North America Inc.'s BF Goodrich subsidiary.
The USW ratified the Bridgestone contract by a 2-to-1 margin and passed the Goodyear and BF Goodrich deals by about a 3-to-1 margin, according to the USW.
The pact with Goodyear expires in July 2017 and covers 8,500 workers at plants in Akron; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; and Topeka, Kan. The six facilities are also protected from closing for the duration of the deal.
Bridgestone's agreement expires in July 2017 and covers 4,500 workers at six operations in Akron; Des Moines, Iowa; Russellville, Ark.; La¬Vergne, Tenn.; Warren County, Tenn.; and Bloomington, Ill.
The BF Goodrich deal runs until July 2016 and covers 2,400 workers at facilities in Tuscaloosa, Ala., and Fort Wayne, Ind.
"We think we did a reasonably good job in the negotiations in making sure we protected the pay and benefits of the employees while continuing the viability of the operations," said Stan Johnson, the USW's international secretary-treasurer. "The tire industry has been under unrelenting attack from foreign competitors. We think the contracts allow the operations to continue to be competitive and to be viable into the future."
Union achieves goals
Johnson said the USW had common goals when approaching the negotiations, specifically closing the gap between pay rate and benefit levels from senior employees and newer hires.
"It was closed in different ways, primarily due to an increase in pay for the new hires and increasing benefit levels, with the exception of BF Goodrich where much of that had already been accomplished mid-term," Johnson said.
Johnson said, as a whole, the union did not make any concessions. He also said that while each contract is unique to each company, the union was successful in putting contracts in place that kept each local on par.
"It certainly preserved pattern bargaining," Johnson said. "There were circumstances that arose during those negotiations that showed the need for a different termination date. We think that might well change between now and the next bargain. The last time we extended for a year and got everyone back together. That could be the case this time."
With Bridgestone, workers received a general wage increase of 50 cents per hour plus the implementation of cost-of-living increases for the future, according to a USW spokesman. The contract increases the pension multiplier by $2 to $58, includes a $1,000 signing bonus for all workers and reduces deductibles on health care for new hires.
The USW also secured a $1 per hour increase for recently hired employees because, the union spokesman said, their wages had fallen behind. The USW did not specify which employees were considered recent hires.
The spokesman said the USW was able to recover most of the pay concessions the union agreed to in LaVergne during the 2009 negotiations to save the facility from closure.
The Goodyear deal re-graded 15 wage classifications that received wage increases, according to a summary of the contract posted on various USW local websites. Two additional classifications will receive a 50-cent-per-hour wage increase upon ratification of the agreement, plus a 50-cent-per-hour wage increase on Aug. 1 for the next three years of the contract for a total increase of $2 per hour over the life of the pact.
The summary said employees active as of July 27 will receive a $1,000 signing bonus for ratifying the agreement. Employees not active must return to active payroll status prior to July 27, 2014, to be eligible for the bonus.
BF Goodrich and the USW declined to release particulars of their agreement.
Focus on health care
In the Bridgestone contract, the union retained the current 90/10 cost share on health care and agreed to review the use of Medicare Advantage Plans and Exchanges, the USW spokesman said.
A second USW spokesman said the main goal in the BF Goodrich negotiations was to maintain what the union calls industry leading and very high-quality health care benefits. The union said it was successful in doing so.
A BF Goodrich spokesman said the com¬pany believes the labor agreement positions its plants to operate in a cost competitive and challenging environment.
Goodyear, however, achieved the ability to freeze the hourly defined benefit plan at any time during the life of the contract, which was the company's main objective.
"Health care is always a major issue," Johnson said. "I'm not sure either party could or even should view changes in health care as specifically concessionary because the health care goes up for all parties, and the corresponding cost goes up for both the company and the union."
Darren Wells, Goodyear's chief financial officer, said the plan becomes frozen 90 days after it is fully funded to Employee Retirement Income Security Act requirements. Once funded, the company is required to keep the plan at least 97 percent funded on an ERISA basis.
"We believe our new contract with the USW addresses our major remaining structural concern, allowing us to increase the transparency to the success in our underlying tire business," said Goodyear CEO Richard Kramer.
"The new agreement accomplishes three things: First, it allows us to fund and freeze the defined benefit pension plan moving exclusively to a defined contribution plan. Second, it reduces the maximum annual profit sharing payment, maintaining performance incentives while lessening the volatility of the previous plan. And third, it continues medical cost sharing and maintains overall wage and benefit costs consistent with the prior agreement."
The CEO said the company's goal was to build on the progress made in the 2003, 2006 and 2009 contracts to "enable its North American business to continue its momentum."
"Like the past three contracts, this contract addresses both our operational efficiency and structural costs," Kramer said. "The new agreement permits us to freeze legacy pension obligations for USW employees, building on our 2006 action to eliminate retiree health care obligations and our 2009 agreement to move new hires to 401(k)-type retirement plans."
Kramer said the new contract adjusts the firm's profit sharing plan to reduce its costs and keeps wages and benefits in aggregate consistent with the prior contract.
"These steps align with our strategy roadmap and further position our North America business to continue on its path," he said.
The summary said Goodyear will increase its automatic 401(k) contributions effective Jan. 1, 2014, and that cost of living adjustment calculations will remain unchanged from the previous agreement. All employees will receive 100 percent of COLA for the term of the agreement. The union said COLA coverage also was expanded to all USW-represented Good¬year employees and that the contract provides more flexibility for members of the Steelworkers to move between jobs within plants.
Johnson said all three agreements contain job protection provisions. The Goodyear deal goes so far as to protect all six plants from closure during the life of the contract.
Wells said Goodyear also has the flexibility to reduce employment levels at each of the six facilities by about 15 percent. It also has 230 discretionary buyouts in 2013 and can offer up to 400 additional buyouts for the duration of the agreement.
The buyouts are calculated based on $2,000 per year of service with a minimum payment of $8,000 and a maximum payment of $50,000, according to the summary.
The USW and BF Goodrich reached an initial tentative agreement, but union members voted it down. Johnson said the main issue was COLA. The new contract incorporated COLA for grandfathered employees in Levels 1 and 2.
Johnson cited market circumstances and the overall value of the agreement as factors in the union wanting a shorter termination date for the BF Goodrich deal.