Goodyear to Change Retiree Benefits Plan
By Terry Kosdrosky
The Wall Street Journal
Thursday, March 1, 2007
DETROIT -- Goodyear Tire & Rubber Co. said Wednesday it will
freeze its current pension plan for salaried workers, replacing
it with a 401(k) program, as the tire maker continues to cut
costs in the face of stiff foreign competition.
The Akron, Ohio, company said it will also increase the amounts
future and current salaried retirees contribute toward the cost
of medical benefits, close the Medicare supplement plan to new
entrants and discontinue company-paid life insurance for
The changes will be phased in over a two-year period and
Goodyear expects savings of $80 million to $90 million in 2007,
$100 million to $110 million in 2008 and $80 million to $90
million in 2009 and beyond.
Goodyear said it will take a charge of $65 million in the
The salaried pension plan will be frozen as of Dec. 31, 2008,
while the changes to retiree medical benefits will be effective
Jan. 1, 2008. Goodyear said the 401(k) savings accounts will
include company contributions. The company also said it would
redesign retiree medical-benefit plans to minimize the cost
impact on premiums.
The moves are part of Goodyear's plan to reduce costs by more
than $1 billion by the end of 2008. The tire maker faces stiff
competition from foreign tire makers with lower labor costs and
high raw material prices.
Goodyear joins many other U.S. manufacturers that are moving
away from defined benefit plans in favor of defined contribution
plans such as a 401(k).
Goodyear endured a 12-week strike from the United Steelworkers
union, which lasted from Oct. 5 to Jan. 2, as the company sought
to take out capacity and ease its burden for retiree medical
As part of the settlement, Goodyear transferred all of its
long-term retiree health-care obligations for those hourly
workers to the USW in the form of a $1 billion health-care
fund. It requires a one-time contribution from Goodyear but
removes the company's obligation to pay future retiree benefits.
Write to Terry Kosdrosky at