Gov't may require Goodyear to pay rent at market rate

Government wants Goodyear Philippines to pay land rent at market rates after its 25-year lease under the Laurel-Langley Agreement expires in May this year.

A top government source told reporters that negotiations are underway to discuss the possible renewal of Goodyear's lease on the land it currently occupies along Zapote Road in Las Piñas.

The official said government is looking at lease rates of at least ten times more than what Goodyear has been paying since the property was leased to the company in 1975.

However, the official disclosed that the negotiations will have to consider the terms of the Laurel-Langley agreement which gave parity rights to US corporations in 1943.

Under this treaty, US corporations donated the lands they acquired during the US occupation to the Philippine government but they also exercised the right to lease them back at preferential rates.

According to the official, Goodyear has been paying rent on an escalated basis with no adjustments for current market rates in the area.

The official said government is discussing the possible extension of the lease but should government decide it would approve an extension, the rates that would be applied would be based on prevailing lease rates.

The official said there are proposals to use the zonal rates set by local government units based on land use and utilization but this would still be way below the market rate especially in an area like Las Piñas which is currently undergoing rapid urbanization and development.

"If this lease contract is renewed, the market should dictate what rates should be used," the official said. "This is what we are negotiating for."

Goodyear, however, is expected to balk at the government's policy as the company struggles to recover from the Asian crisis and the onslaught of stiff competition with imported tires.

The company had asked the government last year to waive the tariffs on their raw materials in order to enhance their operations, warning that their local operations were on the brink of closure because of cut-throat competition posed by imported tires.

Goodyear claimed it has lost millions of pesos in the last two years because imported tires were flooding the market at prices below production costs. The company said their raw materials cost $100 for each tire, but they were forced to compete with imported tires coming from China, Indonesia, Thailand and Japan which were being sold at only $70 each.

Tire manufacturers said the tariffs on their raw materials ranged from three percent to 15 percent and this made them uncompetitive against importers of finished products which were levied 15 percent for ASEAN sources and 20 percent for non-ASEAN countries.

Goodyear is now 89 percent owned by its US-based parent firm, Goodyear Tire & Rubber Co. which increased its holdings from 69 percent. The rest is owned by the Philippine National Oil Co.

GTRC infused $50 million into Goodyear Philippines, representing the equivalent of an outstanding loan made in conjunction with the acquisition of a plant in Marikina in 1996 from the Sime Darby Co.

Goodyear is the largest manufacturer of tires in the country, and employs more than 800 associates in plants in Las Piñas and Marikina. --