Reorganisation will Reduce Michelin’s Capex, says Deutsche Bank

Deutsche Bank has provided comment on the recently announced Michelin closures and restructuring. According to the bank’s Equity Research division, the closure of Michelin’s factory in Toul, France and the passenger tyre division of its Lasarte, Spain plant will allow the company’s Capex in Europe to be lowered by 30 per cent while tackling the pressing issue of labour costs, which are currently 50 per cent higher than Michelin’s global average.

A reported 830 workers will lose their jobs as a result of the Toul closure, and a further 500 layoffs will take place when PCR production ends in Lasarte. According to Deutsche Bank the Michelin reorganisation in Europe will ultimately lead to a better equilibrium between production and sales for the continent – at present Europe represents 70 per cent of the group’s production but only 50 per cent of sales. The closures and restructuring will also in part address the imbalance of scale faced by Michelin’s European facilities, which are two to three times smaller than what is considered optimal – 8 to 10 million units for a PCR factory and 2 million units for one producing truck tyres.