Goodyear to halve capacity at German plant, cut jobs

FULDA, Germany—Goodyear has opened negotiations with the work force at its car and light-truck tire plant in Fulda to cut that plant's capacity in half by year-end 2024, a move that could result in roughly 550 job cuts at the 77-year-old factory in central Germany.

Goodyear said it needs to take this "difficult-but-necessary" action in order to improve its cost structure by decreasing high-cost capacity and optimizing use of the remaining plants in its Europe/Middle East/Africa (EMEA) manufacturing footprint.

The Fulda plant is one of five tire factories Goodyear operates in Germany, as well as one of 13 in Europe. The plant, which opened in 1946 under the auspices of the then-independent Gummiwerke Fulda G.m.b.H. enterprise, has a rated daily capacity of 21,000 units with 1,500 hourly workers.

Goodyear acquired Fulda in 1962. The brand itself dates back to 1900.

The proposed plan would reduce the number of tire SKUs produced in Fulda by approximately 450, Goodyear said in an 8K filing with Securities and Exchange Commission, with about 200 of them being transferred to other EMEA tire plants.

Pending the outcome of the negotiation process with the plant's workforce, Goodyear said it anticipates the proposed restructuring would result in a reduction of approximately 375 salaried jobs and 175 contracted positions.

The move at the Fulda plant comes four years after Goodyear said it intended to modernize that plant and another in Hanau, Germany, to increase their capacities for larger rim-diameter consumer tires.

That initiative, announced about nine months ahead of the outbreak of the COVID-19 virus, was due to reduce employment at two factories by about 1,000 jobs due to efficiency gains related to the use of newer equipment and new plant layouts.

The company said it expects to complete the rationalization plan by year-end 2024 and estimates pre-tax charges associated with this action to be between $105 million and $115 million, of which roughly $65 million will be recorded in the second quarter of fiscal 2023.

Goodyear stressed this action will not impact the Fulda brand, which remains in the tire maker's multi-brand product portfolio, sold predominantly in Europe. Fulda-brand tires are produced in several Goodyear EMEA factories, the company said.

These job cuts would be in addition to approximately 500 salaried positions the company said in January it would trim by mid-2023 amid what it described then as an "uncertain" near-term economic outlook and a "significantly weaker" industry backdrop.

Goodyear said it expects these actions to improve the EMEA segment's operating income by approximately $15 million in 2024 and by approximately $30 million annually thereafter.

In fiscal 2022, Goodyear's EMEA business unit suffered a 74.5-percent drop in operating income to $61 million despite 7.7-percent higher revenue of $5.65 billion. Goodyear at the time cited higher conversion, transportation and import-duty and SAG costs, primarily due to inflation, higher advertising costs and higher costs for wages and benefits.

The EMEA business unit's results are highly dependent upon Germany, Goodyear said, which accounted for 15 percent of the unit's net sales in both 2022 and 2021. Results of operations in Germany are expected to continue to have a significant impact on EMEA's future performance, the company said in its fiscal 2022 results presentation.

Other recent moves by Goodyear to shore up its EMEA business include:

• Moving light-truck tire production out of its Montlucons, France, factory and convert capacity at that plant solely to motorcycle tires, set to be completed by the beginning of 2024.
• Closing the Cooper Tire & Rubber motorcycle and race tire plant in Melksham, England. The move is expected to be complete by year-end 2023 and will affect roughly 350 employees.