According to a filing with the U.S. Securities and Exchange Commission, Goodyear Tire & Rubber Co. plans to close its Gadsden, Alabama factory after reaching a tentative bargaining agreement April 17.
The bargaining agreement remains subject to approval by the membership of the local union, Goodyear said in its filings April 23. The company expects the closure combined with other rationalization actions expects to result in approximately $130 million of annual savings in 2021 when compared with 2019.
The company approved a plan to offer voluntary buy-outs to certain associates at its tire manufacturing facility in Gadsden during the third quarter of 2019. In the fourth quarter of 2019, the company accepted approximately 740 buy-out applications. The voluntary buy-out plan was substantially completed during the first quarter of 2020 and cash payments under this plan totaled $75 million.
The company estimates the total pre-tax charges associated with the April rationalization 2020 plan to be approximately $280 million to $295 million, of which approximately $170 million to $180 million are expected to be cash charges, primarily for severance and other associate-related costs of approximately $55 million and $40 million, respectively, and other closure costs of approximately $75 million to $85 million, according to Goodyear’s filing with the SEC. In addition, non-cash charges, primarily related to asset write-offs and accelerated depreciation, are expected to be approximately $110 million to $115 million.
Goodyear says it expects to record approximately $170 million of these charges in the second quarter of 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.
Goodyear says its plans to close the plant are “part of the company’s strategy to strengthen the competitiveness of its manufacturing footprint by curtailing production of tires for declining, less profitable segments of the tire market.”