Jan 5 2007
The Goodyear Tire & Rubber Company today announced its plan to discontinue tire production at its facility in Valleyfield, Quebec. The company expects to be substantially complete with a transition of the Valleyfield facility to a materials mixing center by the end of the second quarter of 2007.
There are approximately 1,000 hourly and salaried associates at the facility. The mixing center is expected to employ approximately 200 associates.
The reduction in both capacity and labor in Valleyfield is related to the company's ongoing global strategy to reduce excess high cost manufacturing capacity.
"In today's intensely competitive and increasingly global business environment, we face some very difficult choices," said Jon Rich, president of Goodyear's North American Tire business. "The decision to discontinue tire production at Valleyfield is one of those necessary steps to make Goodyear more competitive. This decision does not reflect on the commitment or performance of our Valleyfield associates."
The elimination of tire production in Valleyfield will reduce Goodyear's excess high cost tire manufacturing capacity by an additional 7 million units. This brings total reductions under Goodyear's four-point cost savings plan to 21 million units compared with original targets of 15 to 20 million units by 2008.
This action will result in total charges estimated to be between $115 million and $120 million (between $165 and $170 million after tax) for restructuring and accelerated depreciation, of which an expected $40 million to $45 million is cash. The charges associated with the intended action are expected to be between $70 million to $75 million ($120 million to $125 million after-tax) in the fourth quarter of 2006 with the balance of the charges impacting 2007. When complete, the action is expected to generate annual cost savings of approximately $40 million.
This initiative also supports Goodyear's four-point cost savings plan goal of reducing costs by between $100 million and $150 million. With the already announced closures of tire plants in Washington, United Kingdom; Upper Hutt, New Zealand; and Tyler, Texas, the Valleyfield announcement yields a total of $125 million in projected annual savings.