USW Ratifies Agreement with
Goodyear; Pact Provides Company Substantial Cost
Savings
23411pl.1206
AKRON, Ohio,
December 29, 2006 - The Goodyear Tire &
Rubber Company announced today that it expects to
realize substantial cost savings as a result of a master
contract ratified December 29 by members of the United
Steelworkers union.
Provisions of the three-year 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 health care
liabilities for Goodyear's USW workforce to a 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 J. 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 United States,
gives Goodyear the ability to reduce excess high-cost
manufacturing capacity, lower legacy costs, improve
productivity and source product globally.
The agreement provides for investment of $550 million
over three years in the company's USW facilities to make
them more efficient and productive in manufacturing
high-value-added branded products. Additionally, the
contract provides improved job security for the vast
majority of the company's 12,600-member USW
workforce.
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 December 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 Health Care
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 work force, 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 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 will address the specifics of the new
contract in a conference call for investors, financial
analysts and media in January. The timing of that call
will be announced at a later date.
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 about 80,000 people worldwide.
Certain information contained in this press
release may constitute forward-looking statements for
purposes of the safe harbor provisions of The Private
Securities Litigation Reform Act of 1995. Actual results
may differ materially from those indicated by such
forward-looking statements as a result of various
factors, including,, with respect to the Voluntary
Employee Beneficiary Association (VEBA), whether or not
the various contingencies and requirements are met for
the establishment of the VEBA, including the receipt of
the necessary court and
regulatory approvals. There are a variety of
additional factors, many of which are beyond the
company's control, which affect its operations,
performance, business strategy and results and could
cause its actual results and experience to differ
materially from the assumptions, expectations and
objectives expressed in any forward-looking statements.
These factors include, but are not limited to, actions
and initiatives taken by both current and potential
competitors, increases in the prices paid for raw
materials and energy, the company's ability to realize
anticipated savings and operational benefits from its
cost reduction initiatives, including those expected to
be achieved under the company's master labor contract
with the United Steelworkers and those related to the
closure of the company's Tyler, Texas facility,
potential adverse consequences of litigation involving
the company, pension plan funding obligations as well as
the effects of more general factors such as changes in
general market or economic conditions or in legislation,
regulation or public policy. Additional factors are
discussed in the company's filings with the Securities
and Exchange Commission, including the company's annual
reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K. In addition, any
forward-looking statements represent our estimates only
as of today and should not be relied upon as
representing our estimates as of any subsequent date.
While we may elect to update forward-looking statements
at some point in the future, we specifically disclaim
any obligation to do so, even if our estimates
change.
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