Ruling trips up Cooper sale

Indian firm must reach pacts with unions, arbitrator says

9/16/2013
BY TYREL LINKHORN
BLADE BUSINESS WRITER

The headquarters of the Cooper Tire & Rubber Company is seen in Findlay, Ohio.
The headquarters of the Cooper Tire & Rubber Company is seen in Findlay, Ohio.

FINDLAY — The pending sale of Cooper Tire & Rubber Co. to Apollo Tyres Ltd. has hit a snag, with an arbitrator ruling significant portions of the deal must be put on hold until Cooper’s unionized work force reaches an agreement with the two companies.

The arbitrator’s ruling doesn’t mean the deal is dead, but it does add another complication as the two companies try to close on the sale by the end of the year. Cooper has already dealt with a strike at one of its Chinese plants in response to the deal.

Apollo Tyres of India announced in June it would purchase Findlay-based Cooper Tire for $2.4 billion in what would be the largest acquisitions of an American firm by an Indian one to date.

The agreement sailed through regulatory approvals. However, the United Steelworkers union filed grievances over the sale, saying a successorship clause in its contracts with Cooper wasn’t being honored.

An arbitrator recently agreed with the union, saying that until Apollo has agreements in place with the United Steelworkers, Cooper cannot sell its unionized plants in Findlay or Texarkana, Ark.

Successorship clauses are a way to protect employees should the company be sold to new ownership. Labor experts say such clauses aren’t ubiquitous, but they aren’t uncommon.

Rod Nelson, president of the United Steelworkers Local 207L in Findlay, said Monday the union wants to make sure the Findlay plant is protected under new ownership.

“We’re looking for job security, and we’re also looking for capital improvements being put in our plant to make sure we stay competitive with others in the tire industry,” Mr. Nelson said.

Whether the union will seek more than just a guarantee of the existing contract remains to be seen.

The Findlay plant, which predominantly makes light truck tires, has about 900 union employees. Workers there approved a new, five-year contract early last year after hard-fought negotiations that included a three-month lockout of workers.

Top Cooper officials have said existing labor contracts would be honored by Apollo after the sale, but the arbitrator’s ruling essentially means that the three parties will have to come together and put an agreement in writing.

One worry from the Steelworkers is the amount of debt Apollo will have to take on to fund the purchase.

“The concern is that the deal is heavily leveraged and they might not be able to fund our pension as they’re contractually obligated to,” Mr. Nelson said.

It wasn’t clear how the ruling might affect the sale. The acquisition still has to be approved by Cooper’s stockholders. A special meeting for that vote is set for Sept. 30.

The arbitrator’s ruling could be appealed. But Joseph Slater, a University of Toledo law professor who specializes in labor law and isn’t involved in the Cooper case, said it is generally very difficult for companies to successfully appeal a ruling from a labor arbitrator.

Because of that, Mr. Slater said it is “overwhelmingly more likely” the issue would be resolved by the company reaching a deal with the union than by going through litigation.

Both Cooper and Apollo issued statements to The Blade on Monday saying they would work with the union toward a solution to move forward with the sale.

“Cooper will continue to assess its options,” the company said through a spokesman. “At the same time, Cooper and Apollo are continuing discussions with the USW with an aim of reaching an amicable resolution quickly to minimize any impact on our original transaction closing schedule.”

A spokesman for Apollo said: “The strategic merits of Apollo’s combination with Cooper are clear. Apollo looks forward to working with Cooper and the USW to resolve this matter.”

Mr. Nelson said officials from Apollo have met with top United Steelworkers officials in Pittsburgh. He said local union officials had a brief meeting with Apollo representatives earlier this year.

“I share the goals of the past that we want to work for a company that cares about the people that it employs,” Mr. Nelson said. “We want to work for a company that cares for the community we reside in. We want to work for a company that treats people like an asset and not a cost.”

Shares of Cooper Tire lost 96 cents — or 2.9 percent — Monday to close at $32.26 a share.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134.