Goodyear VEBA Trust Approved by Federal Court
AKRON, Ohio.– The Goodyear Tire & Rubber Company announced today that the Voluntary Employees’ Beneficiary Association trust (VEBA) proposed by it and the United Steelworkers union has been approved by U.S. District Court Judge John R. Adams.
Under the terms of the settlement agreement, Goodyear will now make a $1 billion cash contribution to the VEBA, which will provide healthcare benefits to the company’s current and future USW retirees. The one-time contribution will be made initially from existing cash reserves and available credit lines.
“Gaining court approval for the VEBA is a win-win for Goodyear and for our current and future USW retirees,” said Goodyear Chairman Robert J. Keegan. “This agreement both protects retiree benefits for years to come and removes a significant legacy obligation from our North American business.”
Goodyear’s obligations for providing USW retiree healthcare will be transferred to the VEBA. Creation of the VEBA will result in annual legacy cost savings of approximately
$100 million a year and an approximate $130 million annual improvement in cash flow for the company compared to 2007.
Once the required legal process is complete, Goodyear will eliminate approximately
$1.2 billion of liabilities for current and future post-employment healthcare benefits from its balance sheet. The company expects no significant gain or loss at settlement.
It is anticipated that the legal process will be complete by the end of the third quarter of 2008 provided no appeals are filed. Additionally, savings attributable to the agreement are expected to begin impacting Goodyear’s results in the fourth quarter of 2008.
The VEBA settlement reflects the terms of the agreement made between Goodyear and the USW during their 2006 contract negotiations.
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