Goodyear: Labor deal cuts cost, improves competitiveness

The Goodyear Tire & Rubber Company said that its tentative agreement with the United Steelworkers union supports Goodyear's strategy to significantly reduce costs and improve competitiveness in its North American operations.

"Our goal was always to reach a fair agreement that improves our ability to compete and win with customers. This agreement would accomplish that goal," said Robert J. Keegan, chairman and chief executive officer.

Goodyear says the tentative agreement, which covers workers at 12 tire and engineered products plants in the United States, gives the company the ability to reduce excess high-cost manufacturing capacity, reduce legacy costs, improve productivity and reduce labor costs consistent with the four point cost reduction plan that was announced to investors in 2005.

The tentative agreement:

• Secures retiree medical benefits through an independently administered Voluntary Employees' Beneficiary Association (VEBA) to be launched with an up front $1 billion contribution from Goodyear to consist of $700 million in cash and up to $300 million in additional cash or common stock at the company's option. Subject to court and regulatory approvals, the VEBA would assume full responsibility for providing retiree medical benefits to all present and future Goodyear USW retirees;
• Consistent with Goodyear's previously announced plans to exit certain segments of the private label tire business, provides for the closing of the Tyler, Texas, facility after December 31, 2007;
• Delivers substantial improvements in labor costs and productivity through redesign of incentive systems and immediate implementation of market-based wage and benefit levels for all new hires;
• Improves job security and provides capital investments in USW plants of at least $550 million over the life of the agreement.

Goodyear will hold a conference call in January for investors, financial analysts and media to discuss specifics of the new contract if the tentative agreement is ratified by the USW membership. The timing of that call will be announced at a later date.

The 12 master contract plants and their workers covered by the tentative agreement are: Akron, Ohio; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; Lincoln, Neb.; Marysville, Ohio; St. Marys, Ohio; Sun Prairie, Wis.; Topeka, Kan.; Tyler, Texas; and Union City, Tenn.

Goodyear is one of the world's largest tire companies. The company manufactures tires, engineered rubber products and chemicals in more than 100 facilities in 29 countries around the world. Goodyear employs approximately 80,000 people worldwide.