AUSWR
The Association of U S West Retirees
 

 

 

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 salaried retirees.

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 current quarter.

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 costs.

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 terry.kosdrosky@dowjones.com

http://online.wsj.com/article/SB117268747907522284.html?mod=us_business_whats_news