GADSDEN, Ala.—While nearly 400 union workers at Goodyear's Gadsden plant have decided to "stick it out" and forgo acceptance of a buyout package from the tire maker, another 740 employees have accepted the offer as Goodyear looks to scale back production at the plant.
Mickey Ray Williams Jr., president of United Steelworkers Local 12, is one of the workers still coming in for his shift at the 90-year-old plant located about 60 miles northeast of Birmingham, Ala.
"I'm going to stick it out," Williams said. "I have 17 years of service there, and I'm 46 years old. The math just was not in my favor."
The buyout offer appeared more favorable to those who were closer to retirement age, Williams said.
"It did give an out to some people who needed it," he said. "But we have people here now who are really worried about the future."
Goodyear has said it expects its revised U.S. manufacturing strategy—of which the Gadsden buyout is a part—to yield about $30 million in 2020 in improved operating income in its Americas' segment, and estimates $40 million annually thereafter, according to an 8-K/A filing with the Securities and Exchange Commission related to the company's buyout expenses.
The move reportedly mirrors a similar strategy employed by the tire maker at two locations in Germany, where the company is looking to generate an earnings improvement of between $60 million and $70 million by 2022, while cutting up to 1,100 jobs between the two factories there.
"Goodyear is always looking for opportunities to improve our competitive cost position," a Goodyear spokeswoman said in an email. "While we have significantly improved our manufacturing cost over time, additional actions will ultimately be required to address our need for fully competitive manufacturing costs."
The terms of the buyout packages, governed by the current five-year labor agreement reached between the USW and Goodyear in 2017, will see workers receive $2,000 for every year of service, with a minimum buyout of $8,000 per employee and a maximum buyout of $50,000 per employee, according to the labor agreement.
"Goodyear and the United Steelworkers agreed to offer voluntary buyouts to all eligible union members at the Goodyear-Gadsden plant, as provided for in their Collective Bargaining Agreement," the spokeswoman said. "We did not know how many associates would take this option."
Goodyear said in its SEC filing that it expects to book about $75 million in cash charges, primarily in the buyout payments to the 740 workers.
The company recorded about $70 million of the associate-related charges in the fourth quarter of 2019 and will make cash payments of about $70 million in 2020 and about $5 million thereafter, according to the SEC filing.
Goodyear also expects to record about $10 million to $15 million in non-cash charges related to asset write-offs and accelerated depreciation.
The 740 buyouts at Gadsden come on the heels of 2019's layoffs of 170 employees at the plant, layoffs Goodyear said were done in connection with a change in the plant's work cycle from seven days a week to five days a week, union sources said.
There are 637 associates still at the Gadsden plant, the Goodyear spokeswoman said. The facility employed about 1,600 several years ago, Williams said, and had a rated daily capacity of 25,000 passenger tires, according to data from Rubber & Plastics News' Global Tire Report.
The USW Local 12 president cited the effect of a Goodyear plant in San Luis Potosi, Mexico, which opened in 2017, as an example of how he believed American workers—and specifically those at the Gadsden plant—can get caught up in NAFTA.
"When you take that plant, and then Goodyear takes tires out of our plant ... the people on the floor here knew that and were scared to death," Williams said. "We are getting caught up in NAFTA. We gave up a lot in concessions over the years, even our pension in 2013. This scares people all the way across the country."
Williams said the USW did not endorse a buyout option either way for its workers.
"What we did recommend was that they go home to their families to discuss this and the insecurities of the future," he said.
The spokeswoman said the company maintains "regular and frequent communications" with its workers. "We encourage two-way dialogue with our associates," she said.
Goodyear has said its strategy is to strengthen its manufacturing footprint by curtailing production of certain tires for declining, less profitable segments of the tire market. The Gadsden facility produces the Assurance passenger tire for cars and light trucks, Williams said.
The tire maker's rationalization plan is expected to be "substantially complete" by the first quarter of 2020, Goodyear said in the SEC filing.
"Goodyear is an iconic American company," Williams said. "I hope if they decide to build another plant in America that they do it here in Gadsden. This is a hard hit to our community here and that would give people another opportunity to work."
The layoffs and buyouts at Gadsden are in contrast to the situation at Goodyear's plant in Fayetteville, N.C., where the company disclosed plans to invest up to $180 million to expand capacity for larger-rim diameter passenger tires.
The Fayetteville plant is rated at 40,000 units a day with 2,900 employees, according to Rubber & Plastics News' Global Tire Report.
Bruce Davis, special projects editor for Tire Business, contributed to this report.