Investments, closures – Michelin announces €800M plan

The awaited announcement regarding the closure Michelin’s Joué-lès-Tours truck tyre plant in France arrived on 10 June and was accompanied by news of the company’s intention to invest €800 million in its French facilities over the coming six years. The tyre maker has also announced the end of truck tyre production in Algeria and the sale of this operation.

While truck tyre production in Tours will cease by the first half of 2015 and a €22 million capital programme will gear it towards specialising in semi-finished products (including metal fabrics and rubber bladders for curing presses) along the lines of those already manufactured there, a further €100 million will be invested in building up truck tyre production elsewhere. Michelin says its La Roche-sur-Yon plant will be transformed into a manufacturing centre capable of producing 1.6 million tyres a year.

“Consolidating the output of the Joué-lès-Tours and La Roche facilities will create critical mass and enable the new La Roche centre to meet the highest standards of competitiveness,” wrote Michelin in a statement. The investment will go towards the installation of state-of-the-art production machinery for manufacturing the “innovative truck tyres that Michelin will market in the years to come.” These upgraded production facilities are expected to make the La Roche-sur-Yon plant one of Europe’s leading truck tyre production centres, with 75 per cent of its output exported, while creating an additional 170 jobs on-site. An emphasis on export will to a degree insulate the plant from the whims of European truck tyre demand, which Michelin reports to be 25 per cent below 2007 levels. 

Earthmover capacity increase

In addition to treating La Roche to an upgrade, Michelin has decided to meet the foreseeable growth in the global earthmover tyre market by investing €145 million in its French plants from 2013 to 2019, with projects to upgrade and increase production capacity for earthmover tyres at the Montceau-les-Mines and Puy-en-Velay facilities. Capacity in Montceau will rise 40 per cent and 160 new jobs will be added to the plant courtesy of a €95 million injection, while €50 million will be invested in Le Puy to increase output by one third, helping to create around 90 new jobs. An additional €45-million capital programme will be deployed to increase semi-finished product capacity at Montceau-Les-Mines, leading to the creation of 64 new jobs.

Further projects

Michelin will invest a total of €8 million from now through 2019 to upgrade production facilities at its Troyes agricultural plant in order to increase output and make the unit more competitive. Measures to improve competiveness at the company’s French plants will also be implemented from now through 2019 at a cost of €260 million.

Last but not least, Michelin’s Research and Development center in Clermont-Ferrand is going to be extensively upgraded and modernised over the 2013 to 2019 period with a €220-million programme to transform existing facilities and build new ones. The brand new flagship R&D complex will be designed to maximise Michelin’s innovation capabilities and shorten time-to-market cycles.

Programmes for redundant staff

Of the 930 people currently employed at the Joué-lès-Tours plant, around 200 will continue to work at the new facility semi-finished products facilities. Of the 730 others, Michelin estimates that 250 could benefit from pre-retirement programmes, while each of the 480 remaining persons will be offered two positions corresponding to his or her qualifications at another Michelin plant in France. For employees unable or unwilling to relocate, career transition workshops will be set up. In addition, Michelin says it “feels a deep responsibility to its local host communities.” It has therefore pledged, through its Michelin Développement subsidiary, to create 730 new jobs in the Tours area.

Truck tyre production to end in Algeria

The production and marketing of Michelin truck tyres in Algeria will be sold to Cevital, the country’s largest privately owned manufacturer. Cevital will initially acquire 67 per cent of the local subsidiary’s capital before buying out the remaining shares in a second phase. Michelin says production at the Algerian plant is “too small to be sufficiently competitive” and the plant is located in an urban location that prohibits any future expansion. Therefore, production will be discontinued in late 2013. Cevital, Algeria’s largest private sector employer, has committed to offering each of the plant’s 600 employees a job in one of its other businesses in the country.

The 80 people working in Michelin sales teams in Algeria will continue in their roles under the new employer. As a result, Michelin expects it will maintain a robust sales and marketing presence in Algeria.

Accounting impact

To finance the entire project, Michelin will recognise €135 million in non-recurring expenses in the consolidated financial statements for the six months ending 30 June 2013.