The Goodyear Tire & Rubber Co. has reached a deal with the United Steelworkers union to freeze its defined benefit pension plan once it is fully funded.
Once that takes place, it will transfer those workers to a defined contribution plan.
The decision followed many years of structural cost improvements and contract changes aimed at reducing the future impact of legacy pension obligations on the company’s North American business, said Richard Kramer, chairman and CEO of the company in a statement. It started making some of these changes in 2003, and made additional changes in 2006 and 2009.
“Over the past decade, these four ground-breaking contracts have enabled us to reduce high-cost capacity, establish a VEBA (Voluntary Employees’ Beneficiary Association) to eliminate legacy retiree medical benefit obligations, create a tiered wage structure, improve productivity and now, cap our legacy pension obligations,” he said.
The turnaround of the company’s North American operations couldn’t have taken place without all of these changes, Kramer said.
“This new contract provides the opportunity to take away the volatility that pension obligations have historically had on our earnings and cash flow, enhancing our long-term competitiveness and supporting our goal to be profitable through the economic cycle,” he said.
The new contract gives Goodyear the ability to freeze its DB plans and replace them with a DC plan at any time during the four-year contract once full funding is achieved.
Goodyear’s executives estimated the company’s pension plan would have $1.1 billion in unfunded liabilities at the end of 2013.
The contract covers about 8,000 associates at plants in Akron, Ohio; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; and Topeka, Kan.