Tyre industry pioneers, Michelin has a long history. Having begun in 1889, Michelin is now the second-largest tyre manufacturer in the world after Bridgestone and larger than both Goodyear and Contineantal.
Reports in the Indian press suggest that Michelin has embarked on a tyre market analysis to determine whether it is worthwhile investing in a manufacturing facility in India. In 2000, Michelin was said to be considering an investment of Rupees 500 crore (around 90.5 million Euros) in a manufacturing facility, but the scheme fell through due to the low level of radialisation in the market.
Michelin has introduced two new tyres, designed specifically with Asian driving conditions in mind. Called ‘Pilot Preceda’ and ‘Energy MXV8’, the tyres have been designed to suit road and weather conditions in that part of the world, in both construction and tread pattern.
The Audi A6 Quattro will be equipped with Michelin’s PAX System, size 215-650 R 440 96 Y Primacy Pilot (Summer version) and 205-640 R 440 97 H Alpine Pilot (Winter version). Audi already fits the PAX System to its A8 model.
The recently-launched Michelin Pilot Sport tyre will be fitted as standard on the new Porsche 996 GT3. The sizes are 235/40 ZR18 (front) and 295/30 ZR18 (rear).
There are reports that Michelin is about to launch an upmarket running shoe in conjunction with tennis equipment manufacturer Babolat. The footwear, the cost of which is reckoned to be between $65 and $120, will be made from the same rubber as Michelin tyres, so presumably should provide excellent grip, wet or dry.
Every professional truck driver or motorist knows about the problem arising from wet roads. Especially overtaking a truck in the wet, which can be compared to a leap in the dark with a high level of risk when the rainwater is being splashed aside by the steer axle tyres. It’s this dangerous splash Michelin aims to counteract with a world-first: the patented Anti-Splash tread pattern. With the introduction of a deflector into the tyre’s design, comprising a small horizontal rib on the shoulder between the sidewall and the tread of the tyre, the splash will be deflected back down towards the road surface. The bow wave effect, which is responsible for the visibility, and thus the safety, of the truck and the car drivers, will be minimised.
Michelin has acquired a further 7,822,337 shares in Polish tyre maker Stomil-Olsztyn, representing 28.74 per cent of the equity. This means that Michelin now holds 98.99 per cent of the share capital and voting rights of Stomil-Olsztyn. The price paid was 46.5 Polish Zlotys per share, making the transaction worth 363.7 million Zlotys (84.8 million Euros). 38 million Euros of this was goodwill, which will be depreciated over 20 years. The acquisition, says Michelin, was part of the on-going process to optimise and simplify group structures.
Michelin’s first quarter sales fell 4.9 per cent year on year to 3.655 billion Euros. This was due to a strong negative effect (-10 per cent) due to the weakness of currencies in North and South America versus the Euro. Sales volumes rose, but income fell in passenger car/light truck (-4.9 per cent), heavy truck (-0.9 per cent) and other segments (-5.4 per cent). Despite these figures and a predicted decline in markets, financial analysts regard Michelin as well positioned to make progress, although lower profits for 2003 are forecast.
There are reports in the Chinese press that the Tianjin Saixiang Technology Co. Ltd. is to supply moulding equipment for truck radial tyres to Michelin factories across the globe. The contracts will run for the next three years and the first shipment of TST equipment – destined for France – will take place in August.
The United Steelworkers of America (USWA) has announced that it is beginning master contract negotiations with Goodyear in Cincinnati. The talks will address contracts covering 20,000 members and 22,000 retirees across the U.S. USWA International Vice President Andrew V. Palm will lead the USWA Goodyear/Kelly-Springfield/Dunlop bargaining team. “The security of our members’ jobs, wages, benefits and retirement earnings are our paramount concern,” he stated. “We are convinced that Goodyear can return to profitability while also ensuring these basic protections. We do not intend to allow the company to restructure itself on the backs of its workers. If they don’t see us as part of the solution, it will only compound problems.”
The European Commission has given approval to the acquisition of the Viborg tyre distribution group by Euromaster, the Michelin subsidiary. This gives the green light to the completion of the acquisition, which was first announced last December.
Transense Technologies shares recently crashed when the company announced that it could not enter volume production of its tyre pressure sensors until late 2004. However last week saw the shares rise to 26p after Bridgewell Securities assisted the rise by clearing out a big seller at 14p on Thursday. Rumours that Michelin, the tyremaker and existing Transense licensee, is set to inject cash in return for equity are believed to be unfounded.
Although turnover decreased by 0.8 per cent in 2002, compared with previous year, the Michelin group outperformed even analysts highest expectations with an operating income of 1.225 billion Euros (which is 7.8 per cent of turnover, and 18 per cent more than 2001). Net profit more than doubled to 614 million Euros. At the same time, management succeeded in reducing the debt mountain by more than one billion Euros – all within one year. Consequently, Michelin continues to be the best-earning tyre company worldwide.
Financial analysts MorganStanley have upgraded Michelin from Equal Weight to Overweight, which means that the stock’s total return is expected to exceed the average of those companies reported on in the same industry, over the next 12-18 months. Michelin recently published an encouraging set of figures for 2002 and the analysts believe that the shares, currently trading near an eight-year low of 24 Euros, are undervalued.
In the latest PriceWaterhouseCoopers/Financial Times survey of the World’s Most Respected Companies, Michelin is ranked number nine in the Engineering sector. The list seeks the opinions of more than 1,000 CEOs worldwide, plus fund managers, media commentators, etc. Top of the Engineering list were Toyota and GM, while the top ranked company overall was General Electric, for the fifth year in a row.
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