Rollier Gives Details of Michelin Cost Saving Plans

Speaking in an interview with French daily, Le Figaro, Michelin managing partner, Michel Rollier gave details of how less than 50 per cent of the 20,000 people who will retire from Michelin will be replaced. Michelin’s intention is close the labour cost/sales ratio gap between itself and its main competitors. While Michelin had a labour cost/sales ratio of 29 per cent last year, Pirelli’s and Continental’s labour cost/sales ratio were 21 per cent, according to Deutsche Bank figures.
“In our 2010 estimates we have assumed that only one third of the 1.5 billion gross cost savings (700 million from labour costs, 500 million from purchasing and 300 million from others areas like logistics) will be saved,” said the analysts. Instead 70 per cent is expected to be given back to dealers “mostly through higher gross margins.”

In a separate announcement Michelin gave details of further investments in Poland – with plans to spend 250 million euros on expanding capacity at the top of the agenda. As a result the Polish factory looks set to become the group’s largest plant, benefiting from the attrition of 15,000 people in Western Europe in the coming years.

This most recent announcement is believed to be part of a four-year, 1 billion-euro capital expenditure programme in central Europe. According to Deutsche Bank, direct labour costs per tyre produced is roughly 1.7 euros in Poland compared with 7.5 euros in Western Europe.