More Cuts At Goodyear

The Akron Beacon Journal (ABJ) reports that Goodyear plans to cut 15 per cent of its North American tyre production capacity and move production to low cost centre countries. The source was an internal company newsletter distributed to employees on Wednesday. Goodyear says it can no longer afford to produce low-priced, commodity type tyres in America.

There was no indication of which plants or jobs would be affected by this latest move to slash costs and bring finances under control. However, Chuck Sinclair, speaking for Goodyear on Wednesday told the ABJ that there were no immediate plans to close North American plants but that those plants would need to become globally competitive. Some of the plants have high wage bills which are seeing annual increases in double digits when pensions and health benefits are included.

“The fate of the US manufacturing base hinges on whether we can discover ways of making these factories competitive.” Said Sinclair.Goodyear currently operates some 13 tyre plants in the USA and Canada producing 367,600 tyres per day.

A 15 per cent reduction in production would mean a cut of around 56,000 tyres per day which experts say is equivalent of the closure of one large production facility. Goodyear has been struggling for some time and this latest news has not surprised analysts. David Bradley, commenting from JP Morgan Chase, said, ” Goodyear have been reshuffling production around the world for several years and they may be accelerating that process.

It is hard to say whether it has been effective or not, because despite lots of restructuring their earnings continue to go down.”This latest round of cutbacks follows job losses in support jobs at many facilities, shifts in production and lay-offs at Ohio, Tennessee and Nebraska, with a further 700 white collar jobs going in January 2003. Yet still the company seems to be in decline.

The moves to shift production overseas has a knock on effect and will require negotiating a new master contract with the United Steelworkers of America later this year.From a manufacturing point of view moving production to lower cost centres makes sense and the company is following in the footsteps of rivals Michelin, Continental and Cooper. There is a drive to shift commodity production away from high cost centres and retain the production of specialist and high performance products with higher values in the developed production centres.

Producing commodity tyres in North America just doesn’t make sense when there is an overcapacity in the market of some 400 million units. Goodyear has invested 250 million dollars in a plant at Lawton , Ohio and a further 100 million dollars in Topeka, Kansas specifically to handle the high performance tyres.The development of the plants to handle the high performance tyres has required some flexibility from the workforce and the local communities.