Continental Tire Announces that the Suspension of Tire Production at its Mayfield Plant Will Move Forward

MAYFIELD, Ky., Sept. 29 -- Yesterday, Continental Tire North America, Inc. (CTNA) informed the United Steelworkers of America, AFL-CIO that the cost saving proposals made by the union did not represent a viable framework for continuing tire production at the Mayfield plant and that the company would move forward with its decision to indefinitely suspend tire production in Mayfield by December 31, 2004.

"It is regrettable that these negotiations did not result in an agreement to preserve jobs at the Mayfield plant," said Nick Fletcher, Vice President Human Resources, CTNA. "However, the company cannot continue to operate a plant that is not cost competitive. The proposals made by the union simply did not go far enough to address the cost disparity between Mayfield and our other tire plants."

CTNA announced its decision to suspend tire production at the Mayfield plant on June 29, 2004. The primary reason for the decision was the high process cost in the tire production operation in Mayfield. For many years, the Mayfield plant has been the highest cost manufacturing plant not only within the CTNA manufacturing organization but worldwide.

Although these negotiations were unsuccessful, CTNA made every effort to involve the union in the decision making process. The company first notified the union of the cost issues at the Mayfield plant in December 2002 and requested negotiations to address these issues. However, the Union rebuffed these efforts. In August 2003, the company again attempted to engage the union in negotiations about the future of the Mayfield plant. At that time, the union again expressed no interest in negotiating. Given the union's unwillingness to address the cost issues at the plant, on August 28, 2003, CTNA announced that it would be implementing a restructuring plan to gradually decrease tire production at the Mayfield Plant.

After the August 28, 2003 announcement, CTNA began implementation of the Mayfield restructuring plan. Specifically, in December 2003, CTNA reduced the tire production at Mayfield from 14,100 units to approximately 10,900 units per day and laid off approximately 200 employees. In April 2004, CTNA further reduced the tire production at Mayfield from 10,900 units to approximately 7,300 units per day and laid off another 200 employees. The last phase of the company's restructuring plan is the indefinite suspension of tire production announced on June 29, 2004. This action will result in an additional work force reduction of approximately 870 hourly and 115 salary positions. Mixing facilities and some warehousing operations will continue at the plant.

The union first requested bargaining about the future of the Mayfield plant on June 29, 2004, after the decision that tire production would be indefinitely suspended was announced. Negotiations began on September 2, 2004. On September 17, 2004, the union presented a cost saving proposal designed to address the company's competitive disadvantage in Mayfield. After analyzing the proposal, CTNA informed the union that it was not sufficient to bridge the gap between the Mayfield plant and other CTNA facilities. According to Fletcher, "The reasons for this conclusion are two-fold. First, the union's cost saving initiatives are conditioned upon CTNA agreeing to make a substantial capital investment in the Mayfield plant prior to December 31, 2006. Second, in the company's view, the amount of cost savings that could be achieved under the proposal were overstated by the union and a significant amount of the savings would be derived from reductions in the salaried workforce."

CTNA and the union will continue negotiations to discuss the effects of the company's decision on Mayfield employees. The company is confident that an agreement can be reached to ease the transition for employees adversely affected by the suspension of tire production at the plant.

Continental Tire North America, Inc. (http://www.continentaltire.com/), based in Charlotte, is a group company of Germany-based Continental AG, a leading systems supplier to the automotive industry. Continental Tire North America, Inc. has almost 6,500 employees and operates 6 plants in North America. It is a major supplier to the original equipment and replacement tire markets, selling Continental, General, Euzkadi and private brands.