CTNA Announces Serious Charlotte Cuts

(Akron/Tire Review) Continental Tire North America (CTNA) announced today that it will significantly cut production and lay off employees at its hometown Charlotte, North Carolina., passenger tyre plant. The cuts will come in two phases, said CTNA, with the first taking place on 15 March, resulting in 241 salaried and hourly jobs lost, and the second on 30 June when another 272 jobs will be cut. In total, 513 workers will be laid off, said CTNA.

CTNA had set a 31 December 2005, deadline for a response from United Steelworkers (USW) officials and from USW Local 850 on its demand for a 35 per cent across-the-board wage and benefit reduction, which the tyremaker said was necessary to keep the plant cost competitive.

After the planned lay offs, CTNA said the plant will continue to operate with a staff of 573 hourly and salaried employees. CTNA did not indicate how the plant’s production capacity – estimated at 28,000 tyres per day – would be impacted buy the cutbacks.

“Manufacturing costs in our Charlotte facility are higher than any other Continental tyre plant worldwide, and we have been very clear from the start that we cannot continue in our current situation,” said CTNA President and CEO Alan Hippe. “Our overall objective is to reduce significant financial losses while expanding our market position in the North American marketplace for all tyre operations. For the last several years, we have been analysing our North American manufacturing operations and implementing initiatives to reduce costs in all areas of our North American tyre business.”

Last summer, CTNA cut production at the plant by about 30 per cent, and reduced the workforce by some 300 people.

In an early December 2005 interview with the Associated Press, Hippe indicated that CTNA had not ruled out closing that plant entirely if cost cutting objectives were not met.

CTNA told the union in November that it wanted to cut worker pay and benefit costs by 35 per cent. Hippe told the AP that the company is “definitely prepared for every alternative.” When asked by the AP if the alternatives included closing the plant, he said “Yes.”

“Our company has a very clear and transparent strategy, especially in areas where the labour cost is a major factor,” he told the AP. “In tyres – just to give you an idea – in Germany about 30 per cent of the total production cost is labour. Move that to Romania and then it is about a 10th of that.”

Hippe told the AP that CTNA will likely post a 2005 loss of $83 million to $177 million.

“So far we are still in hope that we get this thing resolved without serious action,” Hippe told the AP. “We have told the union that not achieving an agreement until the year-end would lead to an additional reduction of capacity in the first quarter.”

CTNA is currently in talks with the USW for a new master contract. Its current contract with the union ends in June.

“We want to continue to manufacture tyres in Charlotte, but global competition is putting pressure on us as our manufacturing costs are cheaper overseas,” Hippe said in a statement issued by the company today. “Our future here and all over North America depends on our ability to increase efficiencies and reduce labour costs in our manufacturing operations. The production curtailments we announced today are a reflection of that reality.”