DECATUR, Ill.-When Bridgestone/Firestone Inc. began a recall of 6.5 million tires last August, its Decatur, Ill., factory was at the epicenter of the controversy that enveloped the tire maker.
Almost a year later, it still is. Now, pending negotiations with the United Steelworkers of America and USWA Local 713 in Decatur, the plant will be no more as of Dec. 31.
Bridgestone/Firestone delivered a six-month notice of potential plant closure to USWA and Local 713 officials June 27, as required by the union contract at Decatur. ``Bridgestone/Firestone needs to reduce its production capacity in North America to balance its supply-and-demand situation and assure the financial health of the company,'' said John McQuade, division vice president of BFS manufacturing operations. ``While no final decision has been made, we have determined that the best way to accomplish this is to close the Decatur plant.''
BFS will take a one-time charge of $210 million on June 30 to cover the cost of the Decatur plant closing, BFS Corporate Controller Mike Gorey said. Also, he said, Bridgestone Corp. in Tokyo announced it was taking another $360 million in charges to cover last August's recall. These charges include $60 million for actual recall-related costs and $300 million for litigation. They are in addition to the $450 million worth of recall-related charges the Japanese parent company claimed last year.
Asked about the mood among Decatur's workers after the announcement, Mr. McQuade said: ``This is the sort of announcement no one wants to hear.''
However, a USWA spokesman in Pittsburgh said the Decatur announcement was ``not an irrevocable decision, and is subject to negotiation. We will enter into negotiations to save as many jobs at Decatur as we can.''
The Decatur plant has been in the news ever since BFS announced the recall of 15-inch ATX, ATX II and Wilderness AT tires last Aug. 9. The only Wilderness tires to be recalled-some 2.7 million of them-were made at Decatur, leading to widespread speculation about poor production practices and labor-management unrest at the facility.
This talk was not quieted by the results of a BFS-funded study by Sanjay Govindjee, an associate professor of civil engineering at the University of California-Berkeley, about the causes of tread separation in the recalled tires.
Among other factors, Mr. Govindjee found that the interbelt material properties of the Decatur tires were substantially different from those made at other BFS plants. For one thing, rubber at the Decatur plant was pelletized after compounding, rather than calendered, he said. The pellets were coated with lubricant before extrusion to keep them from sticking together, and residue from the lubricant may have hampered the rubber from bonding with the belts.
The Decatur plant came in for even more bad publicity when Ford Motor Co. announced May 22 it would unilaterally recall 13 million more Wilderness tires. Ford issued comparative charts showing its data on failure modes in tires from various BFS plants, and these charts showed Decatur tires to have the highest failure rates.
However, Mr. McQuade and Mr. Gorey denied that the closure announcement was ``some kind of retaliation,'' as one reporter put it, for alleged production problems.
``This is not a cost issue or an efficiency issue,'' Mr. Gorey said.
``This is strictly a supply-and-demand issue.''
Mr. McQuade praised the ``pride and professionalism'' of the Decatur plant's employees, saying he has ``worked with the people at Decatur for 20 years. They are wonderful folks who are doing a great job.'' As both men explained it, the Decatur plant's age was a major factor in the decision to close it.
First built in 1942 as a factory to make tanks for the U.S. Army, the Decatur factory was converted to tire manufacturing in 1963. It will require ``a major capital investment in the future'' to keep it competitive, Mr. Gorey said. He did not estimate the amount of that expenditure, but did say the company expected to save more than $100 million a year by closing the plant.
No BFS plant in North America is running at full capacity, and Decatur is only operating at about 50 percent of its full capacity of approximately 30,000 tires per day, Messrs. McQuade and Gorey said. The company determined it would be more efficient to close one plant than to reduce shifts at all of them, and age and potential capital investments made Decatur the logical choice to close.
Mr. McQuade said it was ``inappropriate'' to discuss how BFS would transfer production from Decatur to other plants until negotiations with the USWA had concluded. But Mr. Gorey said, ``We believe we can bring our capacity utilization up to 100 percent.'' Mr. McQuade noted BFS' Aiken, S.C., plant has the highest capacity utilization of any BFS factory and ``will run at full capacity'' when the Decatur issue is dealt with.
Despite these expenses, BFS expects to be back in the black by the second half of 2002, by implementing a corporate plan that includes closing the Decatur plant, Mr. Gorey said.
He and Mr. McQuade reiterated earlier statements by John T. Lampe, BFS chairman, president and CEO, that although BFS was hurt by the recall and negative publicity, it is still doing better than it expected this year.
While the industry as a whole is down about 5 percent from 2000, they said, ``we're running about 10 percent better than we planned in the consumer market,'' Mr. Gorey said. In the commercial market, where more significant demand shortfalls are occurring, BFS is ahead of the market 8 percent in replacement tires and 20 percent in original equipment, he added.
Mr. McQuade declined to answer a question about the Firestone brand's share of total BFS production today as compared with a year ago, saying such information is proprietary
Reducing inventories through temporary layoffs and shutdowns has also helped the Nashville-based tire maker's financial position, Messrs. Gorey and McQuade said. Some 440 Decatur workers have been on layoff since Jan. 21. This leaves 1,480 workers at the facility, of whom 1,350 are part of the bargaining unit at Decatur, according to the USWA.
Local 713 President Roger Gates was in meetings all day June 27 with Mr. McQuade, and could not be reached for comment. However, a USWA press release quoted him as saying, ``We are going to turn over every rock and stone to keep this plant open. There's no way we are giving up on saving the jobs of 1,800 people. We've developed an excellent relationship with management. Everything's been working smooth until the recall.''
Even if the effort to save the plant should fail, the labor contract negotiated last year contains strong provisions on behalf of Decatur's workers and retirees, the union said. By December, there will be more than 500 Decatur employees who will have 23 years or more of service, meaning they will be eligible for full retirement benefits with a $50 pension multiplier.
Workers with less than 23 years will receive supplemental unemployment benefits equal to 80 percent of weekly pay. These will be paid for six months to workers with less than 10 years with the company; nine months to workers with 10 to 20 years, and one year to workers with more than 20 years.