Continental Tire North America (CTNA) Inc. is cutting tire production and jobs once again at its oldest and highest-cost U.S. plant.
The company said in late April that it will reduce daily output by a third at its Mayfield passenger and light truck tire plant in July to 7,300 units from 10,900-a move that will result in the layoffs of 200 hourly employees.
In December, Charlotte, N.C.-based CTNA reduced daily production in Mayfield to 10,900 units from 14,000. Conti laid off about 200 workers as a result of that decision as well.
As with last year's cutbacks, production will be moved to other North American Conti facilities, said Hank Eisenga, plant manager in Mayfield. The layoffs are permanent, but there is always a possibility of a change requiring a worker recall, he said.
The decision to reduce output in Mayfield isn't market-driven but rather cost-driven, Mr. Eisenga said. The plant is Conti's oldest tire facility and its most expensive, and cutting production there was the most efficient solution. ``We're continuously evaluating our position from a production standpoint and looking at cost allocation issues,'' he said. ``We have to remain competitive in our industry, and this was the most strategically efficient decision.''
``Continental Tire has a solid work force in Mayfield, so this was not an easy decision,'' said Martien de Louw, CTNA's president and CEO. ``We agonized over a number of scenarios for improving manufacturing logistics, but the Mayfield plant continues to be the highest-cost production facility for Continental in North America.''
The tire maker did not disclose its expected cost savings from the move.
The company's announcement was not good news for production workers, said Terry Beane, president of United Steelworkers of America (USWA) Local 665, which represents the hourly employees in Mayfield. The July layoffs will reduce the number of active, employed members to about 800, he said.
He said he hoped after the December cuts there wouldn't be any more, but added he wished if the company had those plans it would have shared them then. ``If there's something else coming, we won't be happy about it, but we'd still like to know,'' Mr. Beane said. ``It becomes a waiting game.''
Mr. Beane would like to alleviate some of the hits the workers will take from the layoffs by getting some of them to retire. However, the delays in completing master contract agreements in the tire industry have forced Conti and the USWA to put their pension re-opener talks on hold, he said.
The firm has agreed to raise the pension multiplier for its hourly workers to the industry average, but neither Bridgestone/Firestone, Michelin North America Inc.'s Uniroyal Goodrich units nor Yokohama Tire Corp. has worked out new contracts to replace pacts that expired in 2003. The Conti/USWA contracts run into 2006.
Mr. Beane said he knows the Mayfield plant and the work force are victims of companies' constant search for cheaper production and labor costs. The facility has had a different product mix than Conti's other passenger and light truck plants in Charlotte and Mount Vernon, Ill., with short runs and more frequent ticket changes, he said. ``It's always been that way,'' he said.
He's been told the upcoming reduction will eliminate original equipment production at the plant, Mr. Beane said.
Even as Conti cuts production in the U.S., the company has budgeted more than $300 million to build capacity for North America in Brazil and Malaysia.