Goodyear to phase out union pension plan, set up 401(k)

AKRON, Ohio—Goodyear Tire & Rubber Co. will phase out a defined benefit pension plan covering union employees and set up a 401(k) plan under a new contract with the United Steelworkers union.

Under the four-year agreement, nearly all USW-represented employees hired since October 2006 will not be offered the defined benefit plan.

Instead, effective Jan. 1, 2010, Goodyear will set up a new 401(k) plan in which the tire and rubber giant will make automatic contributions equal to 3% of employees’ pay. In addition, Goodyear will match 50% of employees’ contributions up to the first 4% of pay, a Goodyear spokesman said Wednesday.

The pension action is Goodyear’s second in less than a year. It froze its defined benefit plan for salaried employees on Dec. 31, 2008, and beefed up salaried employees’ 401(k) plan.

In 2007, Akron, Ohio-based Goodyear took another step to rein in benefit obligations through an arrangement—also agreed to by the USW—in which Goodyear contributed about $1 billion to a special tax-exempt health care trust that is providing benefits to USW-represented retirees.

In turn, Goodyear eliminated future obligations to provide retiree health care benefits, removing a projected $1.3 billion from its balance sheet and improving cash flow by $145 million a year.