Michelin: “The Crisis has not Called our Strategic Goals into Question”

It is now about a year and a half since the wider economic downturn began to have an effect on the automotive and tyre industries, and companies have had ample time to consider their responses. Upon the release of Michelin’s 2009 financial report in March, managing partner Michel Rollier spoke on the measures taken by the French manufacturer to counter the global crisis.

“For Michelin, the crisis began in mid-2008, and we immediately took steps to preserve our main financial metrics,” he stated. “Each day of unsold production significantly increases our financing needs – that’s why we introduced a tighter production management system to control inventory levels. This hands-on approach has proven effective, helping us to reduce debt and generate positive cash flow.

“To limit the impact of the production cutbacks for employees whenever possible, we considerably increased the number of training days, with programs focused on safety, operational excellence and continuous improvement,” Rollier continued. “We’ve improved the supply chain through more accurate forecasting, shortened time to market to respond more quickly to customer demand, broadened our skills base, and enhanced our flexibility. Our improvements have steadily met the crisis head on. They’ve had just as big an impact and they will be lasting.”

According to Rollier, the crisis has not called Michelin’s strategic goals or its pursuit of them into question. “On the contrary, it has inspired us to step up our efforts,” he confirmed, before elaborating the company’s activities: “Our strategy can be summed up in three key objectives: strengthening our competitiveness through cost reductions; building our presence in emerging growth markets; and extending our technological leadership to outperform the competition in value creation and respond to the sustainable mobility challenges facing the road transport sector. To implement these three strategic priorities, we’re putting our values into action and exercising all our responsibilities.”

Michelin reports that the percentage of tyre sales generated in high growth countries such as China, India and Brazil has increased from 26 to 32 per cent in the past five years, and to meet this demand production capacity in such fast growing countries is expected to rise by 80 per cent for passenger car and light truck tyres and double for truck tyres between 2008 and 2016. “We’re counting on these countries to drive our long-term development since they’re the only regions currently experiencing growth,” stated Rollier. “Today, these markets account for a little more than 30 per cent of our sales, and our goal is to raise that share to at least 40 per cent over the medium term. We plan to double our output in China, where the automobile market expanded by 45 per cent in 2009, and invest in a truck tyre plant in India, a market that enjoys considerable growth potential. We’re going to build a new car tyre plant in Brazil that will triple our local production capacity. And to bring these projects to fruition, we need the full commitment of every team member around the world.”

Growth in these markets is matched with a drive to increase competitiveness in mature markets where production costs are higher. Rollier commented that Michelin is “diligently” pursuing competitiveness programmes with the goal of building “strong bases” in mature markets capable of defending the company’s market share against competition from tyres imported from low-cost countries. “A third of our retiring employees will not be replaced. We’re reducing purchasing and production costs, as well as overheads. The best standards and best practices are being deployed on all our sites and new technologies are being introduced in every aspect of our business,” Rollier elaborated. “We’re upgrading and expanding our plants and refocusing their operations on specific products, as demonstrated by the adjustment programs underway in North America, France and Japan. Despite the crisis, we will almost meet our cost-cutting targets for the 2006-2010 period, and these gains will still be with us once the crisis is past.”