GADSDEN, Ala.—Goodyear will permanently close its 90-year-old passenger tire plant in Gadsden as part of the firm's strategy to strengthen its competitiveness by focusing on growing more profitable segments.
Goodyear disclosed the plan in an 8K filing with the Securities and Exchange Commission.
In the filing, Goodyear said it reached a tentative bargaining agreement with the United Steelworkers union local at the plant and subsequently approved a plan to close the factory, which Goodyear already had scaled back significantly over the past couple of years.
The tentative bargaining agreement remains subject to approval by the membership of the local union, Goodyear said.
In February, Goodyear laid off 105 employees at the plant and cut the daily production ticket to between 2,000 and 5,000 tires. The cuts trimmed the work force to 411 hourly employees, down from more than 1,600 a few years ago.
Goodyear said it expects the combined impact of these rationalization actions to yield $130 million of annual savings in 2021 when compared with 2019.
Due to the closing, Goodyear estimates it will incur pre-tax charges of about $280 million to $295 million. Of that, approximately $170 million to $180 million is expected to be cash charges, primarily for severance and other associate-related costs of approximately $55 million and $40 million, respectively. Other closure costs should fall between $75 million to $85 million.
Non-cash charges, primarily related to asset write-offs and accelerated depreciation, are expected to be approximately $110 million to $115 million.
Goodyear said it expects to record roughly $170 million of the charges in the second quarter of fiscal 2020 and to make cash payments of approximately $45 million in 2020. The remaining charges will be recorded and the remaining cash payments will be made thereafter, primarily in 2021 and 2022.
The company expects to substantially complete this rationalization plan by the fourth quarter of 2021.
The layoffs in February came just weeks after 740 hourly workers at the plant accepted buyouts as part of a realignment by Goodyear of its North American production capacity.
Goodyear said earlier scaling back Gadsden was part of its strategy to strengthen the competitiveness of its manufacturing footprint by curtailing production of tires for declining, less profitable segments of the tire market.
The daily production "ticket" at the plant was more than 25,000 several years ago. The plant is one of five unionized factories Goodyear operates in the U.S.