Goodyear Tire & Rubber Co. has announced that the voluntary employees’ beneficiary association trust that’s intended to take responsibility for much of the company’s retiree health care benefits has been approved by U.S. District Court Judge John R. Adams.
Under the terms of a settlement, Goodyear will make a $1 billion cash contribution to the trust, which will provide health care benefits to the company’s current and future retirees who are members of the United Steelworkers union. The one-time contribution will be made from existing cash reserves and available credit lines.
Goodyear chairman and CEO Robert Keegan said the agreement “both protects retiree benefits for years to come and removes a significant legacy obligation from our North American business.”
Goodyear said creation of the trust would result in annual legacy cost savings of about $100 million and a $130 million annual improvement in cash flow for the company compared with 2007.
Once the required legal process is complete, Goodyear will eliminate about $1.2 billion of liabilities for current and future post-employment health care benefits from its balance sheet. The company said it expected no significant gain or loss at settlement.
The settlement reflects the terms of the agreement made between Goodyear and the union during their 2006 contract negotiations, during which a nearly four-month strike took place.
Filed by Crain’s Cleveland Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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