Stamping Out a Living

As the strike continues Goodyear has tried to keep its struck plants operating with replacement workers. This could dangersoulsy compromise the quality of the tires produced. See below from http://www.usw.org/usw/program/content/3544.php

Although at the beginning of the strike Goodyear sought to reassure investors and analysts that it will be able to maintain adequate supply, the facts say otherwise. The struck facilities represent almost two-thirds of the Company’s North American capacity. Currently those plants are running at 5%-10% of capacity, using 30%-40% of their pre-strike total manpower (management and replacement workers).

This reality is beginning to be seen by Goodyear’s customers. According to a November 13, 2006 article in the Washington Times, smaller dealers report that they already have been hurt by supply problems, and that certain tires are becoming difficult to find. The Executive Director of the New York Tire Dealers is quoted as follows: “[t]he full effect of the strike has not been seen yet, but I think in the next month things will really go downhill. It’s going to get much worse.” The article also quotes the General Manager of Brooks-Huff Tire & Auto Centers: "Our warehouses were busting at the seams when the strike took over,’ he said. ‘It was just a coincidence -- we were trying to meet purchase objectives and stay in good graces with Goodyear.’ But sales have been brisk the past few weeks, and those supplies won't last long, he said. ’Without a doubt, if this strike goes on another month, it will hurt us.’”

The anticipated shortage is particularly troubling in light of management’s stated view that North American demand will be increasing in the period ahead. Most of Goodyear’s higher margin consumer replacement tires are made at Steelworker facilities, so it can be expected that the $5 million a day cost will go up, not down, as Goodyear loses customers.

Perhaps most disturbingly, Goodyear risks a total calamity by creating labor strife that accompanies the use of replacement workers to produce tires. In their January 2003 study, “Strikes, Scabs and Tread Separations: Labor Strife and the Production of Defective Bridgestone/Firestone Tires,” Princeton University scholars Alan B. Krueger and Alexander Mas examine the events leading up to the decision by Bridgestone to recall over fourteen million Firestone tires on Ford Explorers and other vehicles. [Bridgestone] labor dispute.” The authors conclude that “. . . tires produced in Decatur during the labor dispute are found to have a statistically significantly higher rate of claims or complaints.” Chillingly, the authors state that: “We estimate that more than 40 lives were lost as a result of the excessive number of problem tires produced in Decatur
during the labor dispute.”

This tragedy caused irreparable harm to the market position of an extremely popular vehicle and eventually cost Bridgestone almost 2 billion dollars. The Firestone name has never recovered. Goodyear’s decision to walk down the same road must lead to questions about the basic character and fiduciary responsibility of its leaders.
 

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