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Goodyear to Close Australian Tire Plant

On Wednesday, Goodyear Tire & Rubber announced plans to close its tire plant in Somerton, Victoria, Australia by the end of 2008. The plant operates as South Pacific Tires and was built in 1961. In 1987, the plant was formed as a joint venture, but has been wholly owned by Goodyear since 2006. About 600 employees will be affected. The move is expected to remove about 3 million units per year of capacity and result in annual cost savings of $35 million. According to Goodyear CEO Robert Keegan, the closure will complete Goodyear’s plan to reduce high-cost capacity by about 25 million units and achieve annual cost savings of more than $150 million.

This move will remove roughly half of Australia’s current tire production capacity. After the closure, Australia will have one tire plant, Bridgestone’s facility in Salisbury, South Australia.

The main text of Goodyear’s press release is below.

The Goodyear Tire & Rubber Company today announced plans to close its Australian manufacturing facility as part of its strategy to reduce high-cost manufacturing capacity globally and provide cost effective high-value-added products that the market is demanding. This action will eliminate approximately 3 million units of high-cost capacity and provide Goodyear with annual cost savings of approximately $35 million. “This completes our commitment to reduce high-cost capacity by about 25 million units and achieve annual cost savings of more than $150 million,” said Goodyear Chairman and Chief Executive Officer Robert J. Keegan. “Going forward, our efforts will be focused on increasing production of high-value-added tires in low-cost operations to support growth in these segments in Asia-Pacific markets, including Australia and New Zealand.” South Pacific Tyres (SPT) will immediately initiate communications with its 600 associates and union representatives regarding the plan to close the plant in Somerton, Victoria by Dec. 31, 2008. “Goodyear and South Pacific Tyres remain committed to their customers and a strong and ongoing product, retail and wholesale presence in Australia,” said SPT Chief Executive Officer Judith Swales. Total restructuring and accelerated depreciation charges for this action are estimated to be approximately $125 million after tax, of which approximately $85 million is for cash charges. Goodyear anticipates recording charges of approximately $75 million after tax in the second quarter of 2008. Formed in 1987 as a joint venture, SPT has been wholly owned by Goodyear since 2006. The leading tire maker and marketer in Australia, it has more than 3,000 associates. Its results have been consolidated with those of Goodyear’s Asia Pacific region since 2004.
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