Tyre maker Goodyear has announced changes to its pension and retiree benefit plans for US-based retail and salaried employees which it said were aimed at increasing its global competitiveness while “significantly” reducing costs.
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The move comes less than two months after Goodyear workers ended a three-month strike over planned benefit cuts and plant closures.
Benefit plan changes from 1 January next include: increasing the amounts that current and future salaried retirees contribute toward the cost of their medical benefits; redesigning retiree medical benefit plans to minimise cost impact on premiums, closing the company’s Medicare supplement plan to new entrants and ending company-paid life insurance for salaried retirees.
Pension changes include: freezing the current salaried defined benefit pension plans from 31 December, 2008; replacing them with enhanced 401(k) savings accounts with varying levels of company contributions for current workers beginning 1 January, 2009, and introducing company-matching contributions for the salaried 401(k) savings plan at 50% of the first 4% of annual pay, also from 1 January, 2009.
Goodyear expects after-tax savings of $80m to $90m in 2007, $100m to $110m in 2008, and $80m to $90m in 2009 and beyond.
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By GlobalDataThe changes are expected to reduce the company’s pension obligation by approximately $100m and its obligation for other post retirement benefits by about $525m.
“[The changes] are… consistent with our goal of reducing costs in excess of $US1bn by the end of 2008,” Goodyear’s employment chief Kathleen Geier said in a statement.
The tyre maker plans to book a related one-time after-tax charge of about $65m in the first quarter of 2007.
Striking United Steelworkers workers at 16 Goodyear Tyre & Rubber plants in the US returned to work in the first days of last January having begun strike action the previous October.
The strike ended after the unionised workers approved a three-year agreement covering 14,000 employees that included plans to close the Tyler, Texas, tyre factory and create a $US1bn health care fund for retirees. The fund was larger than the tyre maker originally proposed but about half what the workers originally wanted.
Goodyear said then that the pact agreed with unions would help reduce its costs by $610m over three years and $300m a year thereafter.
