ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Friday, February 14, 1997 TAG: 9702140014
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
YOKOHAMA HAS JUST TWO YEARS to show a profit, or the Salem factory could put some high-wage workers out on the street.
Yokohama Tire Corp. plant in Salem will tell employees this summer they must step up productivity to continue earning some of the Roanoke Valley's highest wages, part of a plan for the money-losing plant to turn a profit before 1999.
This the latest wrinkle in an unfolding story about one of the region's largest employers and Salem's largest taxpayer - and a company that says it has lost $100million since 1992.
"We need to be more productive for what we pay," plant manager Jim Hawk said this week. "I'd love to see everybody continue to make what they make, but we need to be more productive for what we pay."
The average production wage at Yokohama is between $19 and $20 an hour, 30 percent higher than the average for Roanoke area manufacturers.
Yokohama's troubles were evident last year, when the plant reduced total employment from 1,050 to 880 and slowed daily output from 19,000 tires to 16,000. The entire U.S. tire industry has been in the doldrums, however. The main causes - a 1995 spike in prices for raw materials, and a decline in what consumers pay for certain types of tires - affected a tire business such as Yokohama, which is small by U.S. standards, more than bigger players.
Last month, the plant's managers and a union representing production workers were told that Yokohama's president wants the plant profitable by the end of 1998.
How to achieve that goal appears likely to be a factor in contract talks, scheduled to begin late this spring. The current three-year contract expires July 23. Production employees are represented by United Steelworkers Local 1023, which this week declined to comment.
Yasuo Tominaga told the Salem plant's managers that failure to reach the two-year profitability goal would mean Salem employees "would be out of a job," according to company spokeswoman Kelly Teenor. Tominaga is president of Yokohama Tire Corp., which consists of the Salem plant and a national tire sales operation. The company is based in Fullerton, Calif., and is owned by Yokohama Rubber Co. Ltd. of Tokyo.
In addition, Tominaga told Salem managers that losses beyond 1998 would prompt the Japanese parent to "reduce its support" of U.S. operations, Teenor said. That support included $40million provided at the end of 1996 to Yokohama Tire Corp., officials said.
But while the statements were interpreted by some workers as ominous, officials in Salem and Fullerton stressed that there are no plans to close the plant.
The two-year stipulation "was just a personal challenge or goal of" Tominaga's, Hawk said. The parent company would accept the plant losing money again this year before hitting its stride next year, Hawk said.
Hawk said a plan to increase safety, quality and productivity, while overseeing installation of a stream of new equipment, is on track to enable the plant to meet expectations.
"Continuing to lose money is not an option. Closing this plant is not an option," Hawk said. "We're going to ... make it ... work."
Some workers share that optimism. "If we continue going on the route we're on now, I see this plant making it," said William Davis, a 23-year employee who builds tires. Under Hawk, an industry veteran who started at the plant in 1995, Davis said safety "improved 100 percent" and quality rose "tremendously."
"The good companies can withstand the bad times," said Frank Jones, a press operator and 20-year employee. "I'd like to think with Yokohama being seventh in the world, we can withstand some bad times. I think we've got the people and I think we've got the product to keep us here."
Some workers are confused, however, about why Yokohama has continued multimillion-dollar investments in equipment as it loses money, said Robbie Grisco Jr., a 6 1/2-year employee and union executive.
If those investments aren't made, "you're out of business," answered Steve Kessing, vice president of human resources at the plant. If Yokohama hadn't spent $150 million since buying the Salem plant as part of Mohawk Rubber Co. in 1989, the factory would not be open today, he said, because of the competitiveness of the industry.
The scope of those investments is a sign of the Japanese owners' long-term commitment to the plant, Hawk said. Some owners, he said, buy a business and milk it for profit, but invest little and sell it. "Yokohama did just the opposite."
Pointing to a $10 million machine installed in 1995 on the plant floor, he added: "You don't unbolt this and say, 'This didn't work. I'm going to go move out of town.'''
To one outsider and tire industry analyst, the parent company's request seems reasonable. "If you were an owner of a business which continues to lose money, one has to reassess how long you need to feed it or else figure out a way how to make it profitable," said Saul Ludwig of McDonald & Co. Securities Inc. in Cleveland.
LENGTH: Medium: 94 lines ILLUSTRATION: PHOTO: JANEL RHODA STAFF. Willie O'Neal, a 13-year veteran,by CNBlifts a tread off the belt in the booking station at the Yokohama
Tire Corp. plant in Salem on Thursday.