Michelin announces changes in the face of the economic downturn

Order Reprints

Groupe Michelin intends to take precautionary measures based on "unprecedented" declines in domestic tire sales recorded by the industry during the first quarter.

In North America, the industry experienced an "historical and unexpected drop in the truck tire replacement market" (15%) and a signficant decrease in passenger and light truck tire replacement sales (7%) during the first quarter.

Passenger and light truck tire price increases are sticking at the replacement and original equipment levels in the U.S., according to Michelin. However, in the face of lower demand, commercial pricing did not stick.

Michelin says it expects the American economy to recover over the second half of the year. However, "the Group can no longer rule out the possibility of a longer-lasting North American economic slowdown which could, in turn, affect other main economic regions."

Michelin has taken "certain precautionary measures" to counteract any economic uncertainty. Its plans call for:

* sustaining price increases.

* adapting capacities directly to sales.

* tightening inventory control (Michelin reduced tire production during the first quarter).

* tightening cost control.

* finalizing a new structural cost reduction plan in North America by the end of the first half. Michelin estimates the plan will lead to annual savings of $125 million.

Michelin says it is re-examining its 2001 corporate investment plan "in order to allow only for the implementation of investments essential to the Group's development or to the improvement of its competitiveness on a global level."

The company announced first-quarter net sales of 3.7 billion euros, up 2.8% compared to the same period last year. It experienced a 4.1% overall decline in unit volume. Its replacement tire sales volume was down 6.8% in North America, and up almost 6% in Europe.

Michelin says it still hopes to meet its medium-term goals: a volume growth 2% above the overall market's growth; a "more balanced position between Europe, North America and Asia"; and an operating margin of 10% by 2005.

You must login or register in order to post a comment.