AKRON — Goodyear is planning to close tire plants in Fulda and Fürstenwalde Germany, impacting 1,750 jobs, as part of a strategy to improve its competitive position and reduce its production cost per tire its Europe/Middle East/Asia (EMEA) region.
The company disclosed today in an 8K filing with the Securities and Exchange Commission that it expects these actions to cost it up to $600 million to carry out but should yield improvements to the EMEA's segment operating income of about $280 million over a three-year period through year-end 2027.
Goodyear earlier had announced plans to cut production at the Fulda plant by 50%.
The announcement comes two days after the company disclosed plans to divest its chemical and off-the-road tire business units and rights to the Dunlop brand in North America and Europe.
Goodyear called the plan, dubbed "Goodyear Forward," a comprehensive evaluation done by the Strategic and Operational Review Committee of its board of directors.
Of the 1,750 employees expected to be impacted by the closing, 1,050 would be hourly workers, according to the German trade union IGBCE, which represents hourly workers at Goodyear's plants in Germany.
The Fulda closing should be completed by year-end 2025, whereas the Fürstenwalde production phase-out will take until year-end 2027, Goodyear said, noting that it intends to continue operating mixing operations at the plant in Fürstenwalde in eastern Germany.
Goodyear acquired the Fürstenwalde factory in 2015 as part of the dissolution of its Global Alliance with Sumitomo Rubber Industries Ltd., which in turn had taken it over in its 1994 acquisition of Pneumant Reifen & Gummi Werke G.m.b.H.
The plans to close are subject to consultation with relevant employee representative bodies, Goodyear said.
Of the pre-tax charges Goodyear expects to incur, $425 million to $450 million will be cash charges primarily for associate-related and other exit costs, with the remainder representing non-cash charges of approximately $150 million, mostly related to accelerated depreciation and other asset-related charges.
Goodyear expects to book roughly $190 million of pre-tax charges in the fourth quarter of 2023 in addition to $67 million of pre-tax charges recorded in the first nine months of 2023 related to the previously announced Fulda plan.
The company also expects to record pre-tax charges of $90 million to $110 million in 2024 and $110 million to $130 million in 2025, as well as related cash outflows of approximately $25 million in 2024 and $300 million in 2025.
The 73-year-old Fulda plant is rated at 21,000 passenger and light truck tires a day, while the 117-year-old Fürstenwalde factory is rated at 10,000 units a day of the same, according to Tire Business' Global Tire Report.
Regarding the potential savings, Goodyear said expects to to achieve annual "run- rate" savings$60 million by year-end 2025, $100 million by year-end 2026 and $120 million by the end of 2027.
According to the trade union, Goodyear cited cheap imports from Asia and high personnel and energy costs as the reasons for its latest decision.
The IGBCE claimed that Goodyear had done "too little" to maintain the locations and ensure secure prospects for the plants now targeted for closure.
For the quarter ended Sept. 30, Goodyear's EMEA business unit reported a 26.7% drop in operating income to $22 million on 1.2% higher sales revenue of $1.37 billion.
Goodyear cited higher conversion costs of $68 million, driven by the effect of decreased tire production on fixed cost absorption, higher energy costs and inflation, for the earnings decline. Sales revenue increased despite a 4.9% drop in unit sales.
For the nine-month period, operating income plunged 92.2% to $11 million for most of the same reasons cited above plus the impact of lower tire volumes, increased transportation costs and unfavorable foreign currency translations.
EMEA revenue fell 1.7% in the first three quarters of fiscal 2023, Goodyear said, to $4.21 billion, due primarily to 4.8 million fewer units sold, especially in the replacement market.
With these closings, Goodyear's manufacturing footprint in Germany will comprise three factories: passenger tire plants in Hanau and Riesa (capacities of 21,000 and 16,000 units a day, respectively) and a truck tire plant in Wittlich (capacity of 6,700 units a day).
The Hanau and Wittlich plants originally belonged to Dunlop Holdings Ltd. and were acquired by Sumitomo Rubber in the 1980s. The Riesa plant was part of Pneumant Reifen.
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This article includes input from European Rubber Journal.
