By Jerry Geisel, Crain News Service
AKRON (Aug. 30, 2013) — Goodyear will freeze its defined benefit pension plan covering union employees after the plan is fully funded as part of a recently ratified four-year contract with the United Steelworkers (USW).
Under the agreement, Goodyear can fully fund the plan any time during the four-year contract. The freeze then would be effective 90 days after the plan is fully funded.
As part of a presentation made to investors, Goodyear estimated that the plan will have $1.1 billion in unfunded liabilities at year-end.
"Our goal for these negotiations was to build on the structural cost improvements and progress made in the 2003, 2006 and 2009 contracts and reduce the potential future impact of legacy pension obligations on our North America business," Goodyear Chairman and CEO Richard Kramer said in a statement Tuesday.
Once the defined benefit plan is frozen, the Akron-based tire manufacturer would set up a new defined contribution plan for affected employees.
The upcoming pension plan freeze is the latest in a series of steps Goodyear has taken in recent years to reduce employee benefit obligations.
As part of a 2009 contract with the USW, nearly all USW-represented employees hired since October 2006 were not offered coverage through the defined benefit plan. Instead, effective Jan. 1, 2010, Goodyear set up a new 401(k) plan.
Prior to that, Goodyear froze its defined benefit plan for salaried employees on Dec. 31, 2008, and beefed up salaried employees' 401(k) plan.
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