Michelin North America Inc. (MNA) plans to close its BFGoodrich plant in Opelika, Ala., within six months, citing an unprecedented drop in demand for the passenger tires produced at the facility.
The pending shutdown—scheduled for no later than Oct. 31—affects 1,000 jobs in Opelika, including about 800 hourly and 200 salaried. Production of BFGoodrich- and Uniroyal-brand radial passenger tires and some light truck tires will be consolidated at Michelin's BFGoodrich plants in Tuscaloosa, Ala., and Fort Wayne, Ind., MNA said.
The factory, which B.F. Goodrich Co. opened in 1963, has the capacity to make about 25,000 units per day, according to Michelin data, but Ron Hoover, United Steelworkers (USW) executive vice president and head of the union's Rubber/Plastic Industry Conference, said production was down to about 8,000 tires per day as of the April 13 closure announcement.
USW Local 753 represents the hourly workers in Opelika, and the Pittsburgh-based union represents the work forces in Tuscaloosa and Fort Wayne as well.
It is likely only a small number of Opelika workers will be Michelin employees when the closing is completed, a company spokeswoman said. Workers can apply for preferential hiring at other sites—the Tuscaloosa plant is located about 130 miles away from Opelika—but Michelin already laid off employees at North American sites this year to deal with the decrease in demand, she said.
Those reductions include about 10 percent of the work force in Opelika and 5 to 6 percent of employees in Tuscaloosa and Fort Wayne.
Mr. Hoover said the market's recovery will dictate how many jobs will be available in the long term, but no one is sure how soon that will be.
Business decisions directly impacting the lives of Michelin's workers are extraordinarily difficult, said Dick Wilkerson, the company's chairman and president.
This action, however, was necessary for the tire maker's long-term health and competitiveness, he said.
“In this crisis, there is no more business as usual.”
Downturn spells doom
Consumers are driving fewer miles, purchasing fewer vehicles and delaying tire replacements. The result is significant overcapacity in the North American tire markets, a condition Michelin doesn't expect will change in the near term.
Last year tire shipments were down from 2007, and the Rubber Manufacturers Association expects the same to be true in 2009 vs. 2008, Michelin said.
The Greenville-based tire maker has been working on improving its efficiency and productivity over the past few years and said it believes that when the economy rebounds, capacity in the remaining plants will be able to handle increased demand, the spokeswoman said.
MNA chose to close Opelika primarily because of flexibility issues, she said. The product lines there can be made at the other BFGoodrich sites, but Opelika isn't equipped to make many of the tires primarily made at those other facilities.
Michelin had considered and implemented several plans to decrease costs since the economy took a negative turn late in 2008, including layoffs, the spokeswoman said. It also shut plants for extended time, cut production hours, froze salaries and canceled management bonuses. “Unfortunately, it wasn't enough for the BFGoodrich plants,” she said.
The Michelin brand, on the other hand, has been resilient during the economic crisis, the spokeswoman said, actually gaining market share.
The cost-cutting scenario the company is facing now is widespread throughout the industry, with each tire maker implementing its own set of production and job reductions. For instance, Cooper Tire & Rubber Co. decided in December to close its Albany, Ga., plant within the next year.
Michelin's Opelika site went through a major curtailment in 2006 as well, when between 30 to 40 percent of tire production—specifically in the mass-market passenger sector—was cut and a similar percentage of workers was laid off.
Mr. Hoover said the firm's action was not totally unexpected, given the reduced ticket at Opelika and the lack of capital investment there to produce high value-added tires.
“The long-term forecast wasn't good,” he said. “I didn't think it could last forever.”
The staffing level at Opelika, including the 10 percent on layoff, should continue through the summer, Michelin's spokeswoman said. The plant then will begin to ramp down, assuming there is no substantial market change.
She emphasized that despite the shutdown, the company is sticking with its strategy of manufacturing in the markets where its tires are sold. More than 85 percent of the tires it sells in North America are made there, the firm said. “We're committed to North American manufacturing,” she said. “We've been the most profitable tire maker here for six years running.”
Looking ahead
Michelin said it will work with the USW, the local government and the community to help make the transition of the affected employees as smooth as possible, including providing separation pay and other benefits. A meeting to begin effects bargaining is slated for April 27, Mr. Hoover said.
The tire maker plans to start a Michelin Development program in the Opelika area to help create jobs and business opportunities via low-interest loans, the spokeswoman said. Michelin set up a similar program in 2006 in the wake of its tire plant closure in Kitchener, Ontario.
That project was successful from the company's standpoint, she said, with more than $2.9 million in loans given to 20 businesses in the Kitchener/Waterloo area since its implementation.
The mood among the experienced, mature work force in Opelika, however, is somber, Mr. Hoover said. He traveled to Alabama shortly after the closure announcement was made April 13. There's a lot of uncertainty among workers about whether they should go for preferential hire or remain in the community where they have worked so long.
“I'll be better prepared to answer those questions after we do effects bargaining,” said Mr. Hoover, who plans to retire June 1. “But I don't care how much you get in the end, losing a job and seeing a plant closed is a terrible thing.”
Investment in unionized plants is always a priority at contract negotiations time, and Mr. Hoover said it will be as important this year. Three-year master contracts with Michelin, Goodyear and Bridgestone Americas Holding Inc. all expire this summer, and with the Opelika factory's shutting down, getting job security at the other two BFGoodrich sites for the next contract term will be paramount.
Michelin's remaining North American plants are non-union.
When asked if the situation in Opelika and the state of the economy give him concern about upcoming negotiations with tire companies generally looking to cut capacity, Mr. Hoover answered: “I always try to be an optimist, but it's becoming more difficult.”