Michelin Observing Profitable Markets

European Commission concerns about competition rules have blocked Michelin from acquiring Continental’s tyre business, but the French company is still showing a strong interest in securing an interest in other competitors. Speaking to Forbes.com about potential expansion into China to offset costs in stagnating markets, Michelin chief executive Michel Rollier said “we have to be pragmatic. If we see a wonderful opportunity we will seize it.

“We are open to a company with a plan, with a market share that matters in a geography that matters to us and an organisation which is in a reasonably shape,” Rollier continued. The chief executive added that Michelin would still be interested in Conti’s tyre business were such a deal feasible.

“If the tyre business was up for sale, we would look at it,” commented Rollier. “We cannot lead a business this size in Europe without thinking about it but would also consider the fact that would be facing some trade issues and the fact that we are two companies that we are very similar.” Rollier expressed similar sentiments to Germany’s WirtschaftsWoche magazine: Michelin would consider acquiring Conti’s tyre unit “with a great deal of attention, even though there might be cartel related problems,” he said.

According to analysts, Asia and Eastern Europe are logical destinations for Michelin in the near future. “In China there are very small competitors so the opportunity for consolidation is huge, and in South Korea, Michelin owns a 10.0 per cent stake at Hankook,” Forbes reports, quoting Pierre-Yves Quemener, an analyst with Landsbanki-Kepler. “Over the last six years they have been building up a higher percentage and they could do the same in the next five years.”

However, such comments come with a caveat that Michelin must bear one thing in mind – any tyre manufacturer would find it very difficult to increase its proportion of replacement sales beyond 80 per cent of the total because they need a steady stream of OE deals keeping the brand name in the public eye.