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South Pacific Tyres announces closure of Somerton factory

Statement from Judith Swales

Chief Executive Officer, South Pacific Tyres

outh Pacific Tyres has announced a plan to close its Somerton tyre factory in December, 2008.

Workers and their union representatives were informed of the plan this morning, and were assured that their full entitlements will be honoured, as detailed in the Enterprise Bargaining Agreements. The factory employs 587 associates.

The ongoing viability of our Somerton factory has long been the subject of speculation, primarily because of the plant's comparatively high operating costs, and its low volume capabilities for the kind of tyres consumers are now buying.

To put this in perspective, conversion costs at Somerton, which is how cost-competitiveness is measured, is almost double that of our average plants overseas, and almost six times that of our most cost-competitive plant.

Despite the best efforts of our manufacturing workers, and their improvements in the area of quality, safety and waste, the Somerton factory is still not cost-competitive.

While the plant has capacity to produce around 10,000 tyres per day, it is not able to produce the high-value-added tyres that foreign and domestic consumers are demanding in record numbers.

These factors, along with Goodyear's global strategy of increasing the production capacity of high-value added plants, and reducing total capacity in high-cost regions, are behind the decision to close the plant.

It is anticipated that the factory will continue operations over the coming six months and will close on December 31, 2008. At this time, affected associates will receive their full entitlements, as detailed in their Enterprise Bargaining Agreements.

Naturally, South Pacific Tyres is most concerned about the wellbeing of associates and their families who are affected most by this announcement.

Support services will be made available over the months ahead to help associates find suitable future employment and South Pacific Tyres will work with unions and local, state and federal governments to facilitate any necessary additional assistance.

South Pacific Tyres respects the role of various unions in representing its workforce, and will engage and collaborate with associates and their unions to ensure a smooth transition.

It is important to note the closure is in no way related to any lack of support from federal, state or local governments. South Pacific Tyres appreciates the support and advice it has received from governments at all levels.

South Pacific Tyres recognises the potential economic and social repercussions of this announcement and will work with local and state governments as appropriate to ease its effect.

South Pacific Tyres remains committed to delivering its customers' immediate and future tyre requirements. South Pacific Tyres will also work closely with suppliers affected by this decision to ensure an orderly conclusion to current supply arrangements.

Going forward, South Pacific Tyres is committed to a strong and ongoing product, retail and wholesale presence in Australia through our ownership and operation of the high-profile Beaurepaires, Goodyear Autocare and Dunlop Super Dealer retail channels and our stewardship of the household Goodyear and Dunlop passenger and commercial tyre brands.

Through these and other ventures, South Pacific Tyres will continue to be a significant employer of over 3,000 Australians in all states and territories and a major supporter of the Australian market.

June 2008