Goodyear Tire & Rubber Co. (GT) said Tuesday it will cut $215 million in expenses, end its defined benefit pension plan and make its U.S. tire plants more efficient under a new four-year union contract.

The largest North American tire maker said sweeping changes in job assignments, combined with the ability to offer more buyouts, will give the company more flexibility to quickly expand or contract its work force based on market trends. In return, Goodyear will invest as much as $600 million over the life of the contract and increase profit sharing.

This is the first time Goodyear has released details about the contract ratified by the United Steelworkers union on Sept. 18. The contract covers plants in Akron, Ohio; Buffalo, N.Y.; Danville, Va.; Fayetteville, N.C.; Gadsden, Ala.; Topeka, Kan.; and Union City, Tenn.

Goodyear has spent the past seven years attempting to alter past U.S. union edicts in order to reduce excess capacity and cut worker costs amid a volatile market dominated by consolidation, increased import competition and higher raw material expenses. This year, tire makers have also been hit by falling sales amid a worldwide recession.

The Akron, Ohio company posted a $221 million net loss for the second quarter, compared with a net income of $75 million the same period the year before as tire industry sales fell in North America and around the world. The company has posted losses in two of the past three years.

"This innovative agreement can truly change the way we run these factories," Goodyear Chief Operating Officer Richard Kramer said in a statement Tuesday. "We can improve our efficiency, flexibility and competitiveness in both the near-term and long-term, driving working capital improvements and allowing us to be more responsive to the needs of our customers."

For example, a tire builder will now be able to perform some maintenance on his own equipment rather than passing the job to a second worker as mandated by prior union rules. The move is expected to improve efficiency and eliminates time lost while waiting for a worker to respond to the problem.

Goodyear estimates it will eliminate $555 million in costs through 2013 based on this contract and other pre-bargaining changes.

"The goal was to reach an agreement that would reflect our current environment," Kramer said. "We have reached that goal."

The contract still leaves the company's Union City plant in an "unprotected" status, meaning Goodyear could shut the plant. None of the company's other U.S. plants have unprotected status.

Kramer wouldn't comment on the plant's future.

Production at Union City was shifted from a continuous operating schedule to a five-day, three-shift operation on July 6. The plant produced about 12 million tires and employed about 2,300 workers before the change.

The next step would be another round of buyouts and more production cutbacks followed by closure. Goodyear closed high-cost plants in six countries, eliminating the production of 25 million tires, between 2005 and 2008. The company has also shed more than 9,000 jobs since the middle of last year.

The contract also allows for the suspension of a general wage increase and the introduction of a defined contribution plan instead of a defined benefit pension. The new plan affects hires after 2006. Workers hired before 2006 will stay in the pension plan.

New hires will also see a modest wage increase although workers will see health-care sharing costs double to 12.5% from 6.5%.

The company will also use buyouts to respond to unexpected market changes and the outsourcing of some maintenance positions. The company won the right to buy out another 600 workers.

Goodyear's stock is up 3.6% at $17.13 Tuesday afternoon.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com