A news release from the Muscatine-based Bandag said the plans will be frozen for salaried and hourly US workers and salaried Canadian employees as of December 31, 2006. Bandag is also offering an early retirement program for eligible employees and has announced voluntary and involuntary separation programs for US workers.
By freezing its US hourly and salaried and Canadian pension plans, Bandag estimated it will record a net curtailment pre-tax gain of $1.9 million for the quarter ending June 30, 2006. Bandag estimates pre-tax cost savings from the early retirement, voluntary and involuntary separation programs to be $5 million to $7 million for 2006 and an annualized net pre-tax savings of $16 million to $20 million.
Bandag announced in the statement that it is now pondering whether to walk away from the plans within 18 months. Taking the steps announced Thursday will allow it to better control retirement benefit expenses, “while at the same time preserving employees’ retirement benefits earned to date,” the company said.
The company also disclosed plans to “modify” its defined contribution program, which it said “is better designed to encourage employees to save for their retirement.”
“The North American markets for commercial replacement tires have changed irreversibly over the past several years, a situation exacerbated by record-high raw material prices and intensified competition,” said Bandag Chairman and Chief Executive Officer Martin Carver, in the news release. “To stimulate growth in Bandag’s traditional retread business, we are taking steps to simplify our operations and lower our operating costs.”
Bandag is the latest in a long line of companies to migrate workers away from defined benefit pension plans and to defined contribution offerings (See Study Warns Companies Against Being Too Quick to Freeze DB Plans ).