Supply Chain Council of European Union |

Goodyear accepts buy-outs from 740 at Alabama factory

AKRON — Goodyear is moving ahead with plans to scale back production at its Gadsden, Ala., tire factory after accepting buy-out applications from 740 employees at the 90-year-old plant located about 60 miles northeast of Birmingham, Ala.

Goodyear said it expects its revised U.S. manufacturing strategy to yield improvements in its Americas’ segment operating income of approximately $30 million in 2020 and approximately $40 million annually thereafter, according to an 8-K/A filing with the Securities and Exchange Commission.

The Gadsden buy-out plan is part of Goodyear’s strategy to strengthen the competitiveness of its manufacturing footprint by curtailing production of tires for declining, less profitable segments of the tire market.

Neither Goodyear nor the United Steelworkers union — which represents workers at the Gadsden plant — commented on the specific terms of the buyout agreements, although Goodyear did say in the SEC filing it expects to book approximately $75 million in cash charges primarily for associate-related costs.

The company said it expects to record approximately $70 million of the associate-related charges in the fourth quarter and to make cash payments of approximately $70 million in 2020 and approximately $5 million thereafter.

Goodyear also expects to record approximately $10 million to $15 million in non-cash charges primarily related to asset write-offs and accelerated depreciation. The rationalization plan is expected to be “substantially complete” by the first quarter of 2020, Goodyear said.

The buy-outs are covered by a provision contained in the current five-year labor agreement, signed in mid-2017 by the USW and Goodyear.

According to that document, each employee who chooses to accept the separation payment will receive $2,000 for each full year of credited service. The minimum separation payment will be $8,000 and the maximum separation payment will be $50,000.

Prior these pending job cuts, the facility, represented by United Steelworkers Local 12, employed about 1,600 and had a rated daily capacity of 25,000 passenger tires, according to data from Tire Business’ Global Tire Report.

In early August, Goodyear CFO Darren Wells said Goodyear was studying a plan to restructure its U.S. operations — reducing “low-value, high-cost” capacity — in a bid to improve business competitiveness.

The plan, he said, was designed to bring about savings “at least as high as the actions in Germany,” a reference to a reorganization program under way in Germany that’s expected to generate a segment operating earnings improvement of $60 million to $70 million by 2022, while cutting up to 1,100 jobs at two factories there.

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