NATCHEZ, Miss.-The merger talks between Fidelity Tire Manufacturing Co. and Denman Tire Corp. collapsed April 12 after Fidelity couldn't secure a pact with its union workers. The failed talks force Fidelity to find additional bias-ply tire customers to fill its capacity.
The merger would have given the Natchez-based company orders for medium/heavy bias truck tires that Denman Tire currently imports.
The $170 million joint venture would have capitalized on the two firms' complementary and predominantly bias tire lines, and increased the ability to invest at both sites, according to Dennis Terwilliger, CEO of Fidelity's parent Condere Corp.
``It would have been a nice fit,'' he said. ``There are very few places where we overlap. Plus, there were several bias lines that Denman was outsourcing from overseas that we could have produced in Natchez, where we have excess capacity.''
The merger-in the works for about a year-would have benefited both firms just from the economies of scale, said Charles R. Wright, Denman president and CEO.
The firms had a number of requirements to meet before April 12. ``Our contract was coming up in a year, and the Denman folks wanted to ensure we had labor stability in the early years of the merger,'' Mr. Terwilliger said.
Fidelity in February told its union workers the two firms had signed a non-binding letter of intent to merge, but the deal hinged on Fidelity securing a new labor agreement, said Leo T. Bradley, president of United Rubber Workers Local 303 in Natchez.
Although Fidelity's final offer contained a wage hike of $1.20 an hour over the three-year pact, the union never voted on the proposal. The Natchez local wanted contract terms similar to union workers at Denman, who earn about $1.50 more an hour in wages and have better medical and dental benefits, Mr. Bradley said. Much of the Fidelity workers' discontent stems from concessions they took when Armstrong sold the plant in 1987.
``We're the lowest paid in the tire industry,'' he said. ``Back in '87 when they bought us, we lost everything. The average worker here makes $12 an hour-$3.50 (an hour) less than we were making before they sold us. They wanted to merge and keep us right on the bottom instead of taking us with them.''
Messrs. Terwilliger and Wright declined to disclose details of Fidelity's offer.
``We were disappointed they didn't even vote on it,'' Mr. Wright said. ``One plus one clearly could have equaled something more than two in this case.''