Proposed agreement between Goodyear and USWA

After months of protracted negotiations, the Goodyear Tire & Rubber Co. and the United Steel Workers of America (USWA) arrived at a draft agreement for a new labour contract, designed to last three years and covering 16,000 Goodyear associates in the USA. Goodyear has said that it wants to take out costs in the order of $1 – $1.5 billion in order to effect a turnaround and the agreement with USWA was regarded as central to this strategy. In late August, Goodyear announced that 500 salaried positions would be cut in North America and there was much anticipation as to what was included in the draft agreement with USWA – an agreement that still has to be voted on by the union, incidentally. Goodyear has 14 factories in the USA and another stated aim of the company was to reduce production over-capacity, with a figure of 15 per cent being mentioned. So what are the terms of the agreement? Below is a summary of the main points, taken from a report by USWA.

The heading of the report tells it like it is: “Saving our jobs, our retirees, our standard of living, our future” is followed by the stark phrase “A company in crisis.” The USWA says that, although it knew that Goodyear as a company was in trouble, it was only after the union commissioned a series of intensive studies into every aspect of operations that it realised that Goodyear was, as the USWA put it: “a very sick company that could within a relatively short time face bankruptcy and a possible liquidation.”

The union also learned of Goodyear’s plans to fix itself, which it describes as a “slash and burn” policy – closing or downsizing several plants, sourcing production from low cost countries, expanding production in non-union plants and to reduce wages, benefits and contractual safeguards. Again, in the USWA’S own words, “the company made a determined effort to force concessions totalling nearly $1 billion down our throats.” Union solidarity, the preamble goes on, made Goodyear realise that this would not work and the only hope was to agree with the Survival Plan that the union had formulated, following its investigation into the company.

The negotiations led to the tentative agreement, which USWA says provides members with an unprecedented level of job security by restricting or eliminating management’s discretion to close or downsize plants, source product elsewhere, pay themselves what they like and other, traditional management rights.

For its part, the USWA recognises that the plan involves some sacrifices on the part of current and retired workers, but believes that the Tentative Agreement (TA) is the best deal it could get.

Protected plants

The USWA’s main objective was to save jobs and factories, and the TA proposes that 12 of the 14 US plants would have “protected plant status”, the factory at Tyler will be partially protected initially and, on achieving certain targets, would move to full protection status. The only non-protected plant in the US – and presumably the only plant to close – is Huntsville, Alabama, which employs 1,100 people.

What does “Protected Plant Status” mean? Firstly, no protected plant can close during the term of the agreement (three years) and hourly staffing levels will not be reduced to less than 85 per cent of current levels. First preference should be given to such plants for producing products developed for sale in North America and there should be no imports of products made at protected plants, unless these are running at full capacity. There should be no transferring of production from protected facilities to non-USWA plants and Goodyear would be required to make capital investments to maintain the competitive status of plants.

Should any layoffs be deemed necessary, this would only happen after discussions with unions and when everything has been done to minimise the effects on the workforce. Restrictions will also be placed on work carried out by outside contractors.

Should any plant (or part thereof) be sold, there is a risk, says the USWA, that the buyer might refuse to hire existing employees and, if he hires fewer than 50 per cent, there would be no obligation to even negotiate with the union. To forestall this, the TA prohibits Goodyear from selling any plant (or significant part) to any buyer who has not first recognised the union and negotiated a Labour Agreement.

“Bloated management forces”

It is indicative of the USWA’s attitude to Goodyear’s management that a section of the TA is headed “Protection against bloated management forces at Akron HQ and the plants”. This argues for a reduction in salaried workers and another section, headed “Protection against runaway executive salaries” pegs executive’s salaries to those of executives at “comparably sized industrial companies”. Stock options would only be awarded to “reward long-term appreciation in the value of the company’s stock.” To keep a check on what is happening at Akron, the USWA would be given a seat on the Goodyear Board of Directors.

The TA contains a promise regarding restructuring of debt. By the end of the year, Goodyear will be constrained to raise $250 million by selling debt securities and raise $75 million by selling Goodyear stock. Should the company fail to achieve either of these, the USWA reserves the right to strike, saying that Goodyear must restructure its debt before it becomes so short of cash that salvation would be impossible.

The union also requires Goodyear to bring in fresh capital from an outside investor (who would doubtless seek to influence the management and direction of the company) and for the company to refinance $1.3 billion of its current bank facilities by launching new loans. Again, failure would incur penalties.

The USWA also negotiated what it describes as “improvements” to unemployment benefits and resisted a company move to shift the Cost of Living Allowance adjustment from quarterly to annually. There were changes too to the employee profit sharing plan.

The USWA says that the biggest disappointment during negotiations was the inability to secure protected status for Huntsville, but, even had the union gone on strike, Goodyear would have remained adamant that the plant had to close. The reason for this is that Huntsville has the highest costs of any Goodyear plant and incurs the largest losses. Goodyear also points out that, moving Huntsville’s production to other USWA plants will help secure their futures.

The union was caught on the horns of a dilemma; had Huntsville been kept open, continued losses would have resulted in bankruptcy, said Goodyear. Equally, a lengthy USWA strike would have had the same result and the union recognised that bankruptcy could have spelt disaster for Goodyear’s pension plans. So, Huntsville had to go, but the USWA notes that it negotiated an enhanced closure package.

All of Huntsville’s production will be switched to USWA-represented plants and production of one million tyres a year will be switched to the Gadsden facility from non-USWA plants to help provide jobs for ex-Huntsville employees.

Improved productivity

So far, most of the concessions appear to be one-way, but the USWA recognised the need to make savings and reduce costs. While Goodyear wanted to “slash and burn”, says the union, it has come up with a plan to find economies in work practices and productivity changes. Each plant will establish a “Local Improvement Plan”, under which the local union can negotiate on any subject that does not alter the terms of the Master contract.