DETROIT - Goodyear Tire & Rubber Co expects to save $215 million under a four-year contract with the United Steelworkers union that the company said on Tuesday gives it flexibility to change schedules, work rules and adjust the size of the workforce.

Goodyear, whose shares were up 3.8 percent in afternoon trading, and the union reached agreement on the contract in August that covers about 10,300 workers at seven plants in the United States.

Taken with pre-contract agreements, the largest U.S. tire maker expects to save about $555 million over the four years. It also agreed to invest $600 million in the union-represented U.S. plants over the four years of the contract.

Goodyear provided job security to six of the seven plants over the life of the contract, leaving jobs at a plant in Union City, Tennessee, unprotected.

Goodyear's results have come under pressure over the last year as U.S. auto production cuts reduce sales of tires to auto manufacturers and the downturn in the economy globally that has hurt demand for replacement tires.

In late July, Goodyear executives said they were starting to see signs of economic stabilization and recovery globally. Auto executives also have begun to bring back some production in anticipation of a gradual recovery in auto sales.

Direct sales of tires to vehicle manufacturers account for about 30 percent of its unit volume and 20 percent of revenue overall, with the replacement market accounting for the rest.

Goodyear said the agreements reached this year build on changes approved in its 2003 and 2006 union contracts.

The agreements give Goodyear more flexibility in scheduling vacation shutdowns, responding to changes in market conditions and allow Goodyear to use buyouts if necessary.

They also give production workers the ability to perform minor maintenance, increase medical cost sharing and permit some outsourcing of equipment maintenance.

The defined benefit pension plan has been eliminated for substantially all hires after October 2006 and replaced by a defined contribution plan.

The deal, which was ratified by union members earlier in September, stands in contrast to a three-month strike that preceded the previous three-year agreement in 2006.

The contract covers plants located in Akron, Ohio; Buffalo, New York; Danville, Virginia; Fayetteville, North Carolina; Gadsden, Alabama; Topeka, Kansas; and Union City.

Goodyear shares were up 62 cents to $17.15 on the New York Stock Exchange. (Reporting by David Bailey; Editing by Tim Dobbyn)

Tennessee