Goodyear to change pension, benefit plans for employees, retirees

Akron, Ohio - Goodyear next year will freeze its defined benefit pension plans for employees and replace them with 401(k) savings accounts as part of several moves to save about $100 million on pension obligations and $525 million on other post-retirement benefits.

The Akron-based tyre maker said the changes are part of its plan to cut costs by more than $1000 million by the end of 2008.

"These changes will allow us to continue to provide the kind of compensation packages that are competitive and will attract and retain talented associates," said Kathleen Geier, senior vice president of human resources. "The changes that we´ve made were only made after careful consideration of alternatives, recognising that there will be varying levels of personal impact depending on the circumstances of each associate and retiree."

The changes will be phased in over a two-year period, the firm said, with most benefit plan changes effective next year and many pension plan changes effective in 2009.

Goodyear expects the moves to save $80 million to $90 million this year, $100 million to $110 million in 2008 and $80 million to $90 million in 2009 and later. The company will take a one-time charge of $65 million for the actions in the first quarter.

Among its benefit plan changes, Goodyear plans to:

--increase the amount that current and future salaried retirees contribute to the cost of their medical benefits;

--redesign retiree medical benefit plans to minimise the cost impact on premiums;

--close the company´s Medicare supplement to new entrants; and

--discontinue company-paid life insurance for salaried retirees.

On the pension plan side, Goodyear plans to:

--freeze the current salaried defined pension plans as of 31 Dec., 2008;

--replace the defined benefit pension plans with 401(k) accounts with "varying levels of company contributions" for employees, beginning 1 Jan., 2009; and

--Introduce company-matching contributions for the salaried 401(k) savings plan at 50 percent of the first 4 percent of annual pay, beginning Jan. 1, 2009.

Goodyear also recently was able to reduce similar costs for its unionised employees in North America as part of its new contract with the United Steelworkers. As part of the pact, Goodyear will secure retiree medical benefits through an independently administered voluntary employees´ beneficiary association with a $1 billion contribution from the company. Of that contribution, $700 million will be in cash and $300 million in additional cash or common stock at the company´s option.

From Rubber & Plastics News (A Crain publication)