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BREAKING NEWS: Union Ratifies Goodyear Master Contract

(Akron/Tire Review) Members of the United Steelworkers (USW) union today ratified a three-year master contract with Goodyear Tire & Rubber Co., officially ending the strike affecting 12 U.S. plants that began on Oct. 5.


Provisions of the contract provide Goodyear with the ability to achieve up to $610 million in cost savings over its term and $300 million a year in ongoing savings. Compared with 2006 pre-strike levels, savings are expected to total $70 million in 2007, $240 million in 2008 and $300 million in 2009.


The agreement provides the transfer of responsibility for all current and future retiree healthcare liabilities for Goodyear’s USW workforce to a Voluntary Employees’ Beneficiary Association (VEBA) trust, reducing a significant portion of the company’s legacy costs.

"Reaching agreement on a contract that competitively positions Goodyear for the future is a huge achievement for everyone involved in the negotiation process," said Robert Keegan, chairman and chief executive officer. "The end result is Goodyear will be a stronger company, a stronger employer and a stronger overall global competitor."

The master contract, which covers workers at 12 tire and engineered products factories in the U.S., gives Goodyear the ability to reduce excess high-cost manufacturing capacity, lower legacy costs, improve productivity and source product globally.


The agreement provides for an investment of $550 million over three years in the company’s USW facilities to make them more efficient and productive in manufacturing high-value branded products. Additionally, the contract provides improved job security for the vast majority of the company’s 12,600-member USW workforce, according to Goodyear.

Goodyear said there were three primary areas of focus in the negotiations: excess high-cost manufacturing capacity, legacy costs and productivity including wage costs. The ratified contract achieves Goodyear’s objectives and enables cost savings initiatives in each of these areas, according to the company.

Key elements of the contract include:

Reducing excess high-cost manufacturing capacity:

– The company will close its Tyler, Texas, plant after Dec. 31, 2007, thereby eliminating 9 million units of high-cost tire capacity and yielding approximately $50 million in annual savings.


– The company had previously announced a goal to eliminate 15 to 20 million units of high-cost tire capacity by 2008. With the Tyler closure, Goodyear will have eliminated 14 million units toward this goal.

Reducing legacy costs while securing healthcare benefits:

– Goodyear will transfer all USW retiree medical obligations to a VEBA trust (subject to court and regulatory approvals).

– Goodyear’s up-front contribution to the trust of $1 billion will consist of at least $700 million in cash with the balance in additional cash or common stock at the company’s option.

– Goodyear will reduce OPEB expenses annually by an estimated $110 million and improve cash flows by $145 million annually compared with 2006.

– After the VEBA is established, Goodyear will eliminate all current and future OPEB liability related to the USW workforce, which represents more than half of the company’s projected benefit obligation for post-retirement benefits.


Increasing productivity:

– Lower-cost wages and benefits for new hires during the first three years of employment.

– Incentive systems have been designed to improve productivity.

– The expected combined benefits realized from the new wage structure and additional productivity initiatives would total a savings of $300 million over the three-year contract. Compared to 2006 rates, the ongoing annual savings will total $155 million by 2009.

– Goodyear will invest $550 million over three years to modernize its North American plants.

Other terms of contract:

– Goodyear has agreed to profit sharing of up to $25 million in 2009 and up to $30 million in 2010.

– Goodyear has also agreed to restoration of pension service, resulting in a cost of approximately $13 million annually.

The 12 master contract plants and their workers covered by the agreement include: 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.


Workers at four Canadian plants who struck in support of the master contract in the U.S. are currently voting on a separately negotiated proposal. The plants include a warehouse and retreading facility in Toronto and engineered products plants in Collingwood and Owen Sound, Ontario.

Goodyear said it will address the specifics of the new U.S. contract in a conference call for investors, financial analysts and media in January.

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