CHICAGO – Union workers at Goodyear Tire & Rubber Co. (GT) have voted to end a three-month-old strike, ratifying a contract that will save the company as much as $610 million by cutting production and health-care costs, both sides said Friday.
More than 10,000 United Steelworks members voted on the contract, approving it by a margin of more than two-to-one, the union said in a statement. All striking workers are set to return to work starting on Jan. 2, ending a walkout that began Oct. 5.
The new three-year contract establishes a company-financed trust fund of more than $1 billion that will secure medical and prescription drug benefits for current and future retirees, the union said. The company also agreed to invest $550 million in union-represented plants.
"It took a strike, but we achieved a fair and equitable contract that protects quality health care for active and retired members," USWA executive vice president Ron Hoover said in a statement. "And by winning major capital investment expenditures, it secures our jobs for the future."
Goodyear said that the trust fund will reduce a significant portion of its costs related to its retirees. The company said its $1 billion upfront contribution will consist of at least $700 million in cash, with the balance in additional cash or common stock.
Under provisions of the three-year contract, which covers workers at 12 tire and engineered products plants, Goodyear will save up to $610 million in costs, and $300 million a year in ongoing savings, the company said in a statement.
Goodyear expects savings to total $70 million in 2007, $240 million in 2008 and $300 million in 2009.
"Reaching agreement on a contract that competitively positions Goodyear for the future is a huge achievement for everyone involved in the negotiation process," Goodyear Chief Executive Robert Keegan said in a statement.
Goodyear and the union reached a tentative agreement last week to end the strike by 15,000 union workers in the United States and Canada, and announced the deal early Friday morning.
Last month, the company said it was losing up to $35 million a week due to the strike.
The Akron, Ohio-based company said under the deal it can pay lower wages and benefits for new hires during the first three years of employment.
Goodyear will close its plant in Tyler, Texas, after Dec. 31, 2007, instead of immediately, as it wanted. This will eliminate 9 million units of high-cost tire capacity and yield about $50 million in annual savings.
When the plant closes, the company said it will have eliminated 14 million units of high cost tire capacity out of a targeted 15 million to 20 million units.
Goodyear also said it has agreed to profit-sharing of up to $25 million in 2009, and up to $30 million in 2010.