Michelin Determined to cut North American Labour Costs

In a continuation of its recent wage dispute, Michelin has started negotiating a new wage agreement. The deal, which also discusses medical benefits, concerns four plants and 5,000 members of the company’s North American workforce.

The dispute is rooted in the fact that tyre manufacturing is a labour cost intensive industry. Last year, 32 per cent of Michelin’s turnover was spent on labour costs. Of this figure 50 per cent were spent directly on wages. In the US wages reached a new high of $70,000 (£38,000) at the company’s unionised plant. This compares to an average $47,000 (£25,500) in Western Europe, $18,500 (£10,000) in The Czech Republic and $6300 (£3420) in Romania. These figures show why negotiations are tough and why Michelin’s management is so determined to reduce their North American labour cost bill.

If no significant cost reduction is achieved, the management could take a more radical decision, for example they could outsource production to a lower cost country.