Continental Tire North America (CTNA) Inc. has agreed to sell its Bryan, Ohio, off-the-road tire plant to a German OTR tire retreader, but the deal could still fall through if the firm can't negotiate equitable terms on a new contract with the plant's union.
Representatives of Dortmund, Germany-based RÃ¶sler Group and United Steelworkers (USW) Local 890L in Bryan were scheduled to meet June 16-17 to discuss contract terms. RÃ¶sler Group was seeking more flexible work rules from the USW in order to allow the new owners to justify making investments in radial building equipment, according to Paul G. RÃ¶sler, director of the firm.
Mr. RÃ¶sler said reaching terms with the union would be the make-or-break element of the deal. The union had indicated its resistance to work-rule changes, he added, as well as asking for more generous pension and other benefits.
Mr. RÃ¶sler estimated the 38-year-old Bryan plant would need $10 million in new equipment to boost radial production and make the unit competitive.
Terms of the deal with Conti were not disclosed, although Mr. RÃ¶sler said Conti would be responsible for the existing pension obligations.
Conti disclosed in January that it intended to sell the Bryan plant and June 3 notified the state of Ohio of the pending sale. In that contingent notice, CTNA said it ``intends to transfer substantially all of the assets of the Bryan plant to the purchaser if the transaction is consummated'' and that it anticipates that RÃ¶sler will retain all of the facility's 312 employees.
A CTNA spokeswoman confirmed the notice and that employment of Bryan workers will be transferred over to the buyer, but she declined to comment on the pending deal.
CTNA entered into a letter of intent with RÃ¶sler on Jan. 13. The company's pending sale of the Bryan OTR facility is expected to conclude July 31 or within 14 days thereafter, according to CTNA's notice.
The Bryan factory-opened by General Tire & Rubber Co. in 1967-makes bias- and radial-ply agricultural, earthmover, industrial and OTR tires and has an estimated capacity of 232 units per day. CTNA's pending sale of the Bryan OTR plant to RÃ¶sler comes on the heels of an announcement that it is cutting passenger and light truck tire production at its Charlotte plant by about 30 percent. Last year, the tire maker phased out tire production at its Mayfield, Ky., plant, in the process taking $129 million in charges against earnings.
RÃ¶sler Group is quite familiar with the Bryan plant, Mr. RÃ¶sler said, because it supplies RÃ¶sler's retreading plants in Germany with slick casings, which are then given new treads for sale in Europe. Mr. RÃ¶sler said if the sale is concluded, his firm would continue to make Conti radial and General bias-ply OTR tires until it could replace all the molds with its own Rodos or Schelkmann brand names.
In the grand scheme of Continental A.G.'s North American business, selling the Bryan factory is irrelevant, said Adam Jonas, a securities analyst with Morgan Stanley Equity Research in London. He noted that even if the OTR business had a 10-percent, pre-tax profit margin, it would amount to only 0.1 or 0.2 percent of Conti's worldwide revenues.
``Sounds like cleaning house, really,'' Mr. Jonas said of the pending deal.
He pointed out that the recent appointment of Alan Hippe, essentially Conti's CFO, to replace Martien de Louw temporarily as president and CEO of CTNA, suggests that Conti is taking a financial instead of an operational approach to its losses in North America. The result is an aggressive capacity exit from high-cost facilities while at the same time expanding capacity at lower-cost plants in Brazil and Mexico.
Conti's goal for 2005 is to breakeven in North America in the fourth quarter. But after Continental A.G. Chairman Manfred Wennemer's recent meeting with stock analysts, Mr. Jonas said investors do not expect Conti to reach that goal.
The USW represents 257 employees at the Bryan plant, CTNA's notice stated. For the union to approve of the sale, RÃ¶sler essentially would have to recognize the USW as the bargaining representative for Bryan employees and assume all agreements between CTNA and the union, according to the terms of successorship in CTNA's union contract.
Kent Hardy, secretary for Local 890L in Bryan, said union officials there already met with RÃ¶sler representatives prior to June 16 to discuss a labor agreement. ``We think that we're getting close, and we're hopeful that we can get the deal done'' by July 31, Mr. Hardy said.
The USW is seeking a contract similar to its current pact with CTNA, he said.
``We have a workforce where several of our members are on the backside of their careers, and pension benefits are really important to them,'' Mr. Hardy said. He noted the union still needs to sit down with CTNA to discuss pensions, particularly where the tire maker sees that its liability stops and RÃ¶sler's liability begins. The union also needs to discuss a few open grievances with the company, he said.
``We've conveyed to the company what our concerns are and the issues we wish to discuss with them so we can complete the deal, and they're aware of those,'' Mr. Hardy said.
In a similar vein, the USW is renegotiating a contract with Titan International Inc. on a farm tire plant in Freeport, Ill., that Titan intends to buy from Goodyear. The union's agreement with Goodyear at that plant also contains a successorship clause that requires the purchaser to reach a deal with the union before the sale is completed.
RÃ¶sler, meanwhile, has no tire or retreading business in North America and wants to expand, according to Mr. Hardy.
``They're very good at what they do, and their product is widely recognized as a good quality product,'' Mr. Hardy said.
RÃ¶sler Group retreads OTR tires using both the mold-cure and precure processes-operating as Rodos-Reifen and Schelkmann Reifen, respectively-and a polyurethane tire filling business, Zeus-Polyfill. Combined, the businesses represent about $27 million in annual sales.
Paul G. RÃ¶sler founded the firm in 1960; his sons Martin and Paul now direct the business' day-to-day operations.
Reporter Bruce Davis contributed to this story.
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What's up at Conti
Adam Jonas, a securities analyst with Morgan Stanley Equity Research in London, said Continental Tire North America Inc.'s sale of its Bryan, Ohio, factory ``sounds like cleaning house.'' He suggested that the tire maker is taking a financial-instead of an operational-approach to its losses in North America and is attempting to exit high-cost facilities as it expands capacity at lower-cost plants in Brazil and Mexico.