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'We do not have any plans to add retail stores:' With cost-cutting initiatives ahead of schedule, Michelin's Micali focuses on selling tires with your help

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'We do not have any plans to add retail stores:' With cost-cutting initiatives ahead of schedule, Michelin's Micali focuses on selling tires with your help

Unlike his counterparts at Goodyear and Bridgestone/Firestone, Michelin North America Inc. (MNA) Chairman and President Jim Micali has managed to keep a low profile lately. But that has been his way. He quietly moved from executive vice president of legal and finance to executive vice president of the North and Central American geographic zones during Michelin's major restructuring in early 1996. Eight months later he accepted his current position at MNA.

But he didn't stop there. In July 2001, he was elected to Groupe Michelin's executive council, the first native-born North American to sit on the council. Then, last October, he was elected chairman of the Rubber Manufacturers Association's board of directors.

MTD:Michelin North America has made a concerted effort in 2002 to "become more profitable." What moves have you made to that end -- either internally or in the marketplace -- and what are the results to date?

Micali: On Sept. 10 of last year, we announced our intention to reduce our annual operating costs by some $200 million and to reduce the North American workforce by about 2,000 jobs, or 7%, by the end of 2003. We are actually ahead of plan on this in all respects.

MTD: Except for TCI, which Michelin purchased a few years ago, MNA has no company-owned stores. Is this a planned strategy, or do you plan to add company-owned stores?

Micali: Retailing is not central to our core business, therefore we do not have any plans to add retail stores. TCI may occasionally acquire stores or divest itself of stores in order to best serve its customers.

MTD: Now that your lawsuit with Bandag has ended, will you aggressively seek out retreaders again? Adding Pre-Mold and Custom Mold retreaders seems to have slowed considerably since 1999.

Micali: While litigation had an impact, our initiative to expand our infrastructure wasn't altered. We never stopped aggressively seeking franchisees, and we have every intention of signing more franchisees for Michelin Retread Technologies Inc.

MTD: Tire dealers called us and voiced their dissatisfaction with your decision to end the Maximum Value Policy program, which was designed to protect the profit margins and beef-up sales of the BFGoodrich All-Terrain T/A KO light truck tire. Why did you end it? Did Robinson-Patman Act issues come into play? How will your decision to end the program help dealers?

Micali: We ended the program because it fulfilled its mission, which was mainly to put the price in line with the value of the product. The Robinson-Patman Act was not a factor. We have followed dealer pricing, and it has not changed substantially since the program ended.

MTD: Michelin is putting a lot of emphasis on its PAX run-flat system. So, when can we expect to see PAX as original equipment on vehicles in the U.S.?

Micali: We currently have PAX System projects with virtually all of the worldwide OEMs and would prefer to leave the announcements of launch dates to our customers.

MTD: Has the 2003 Cadillac Roadster, on which PAX was supposed to be fitted, been put on hold?

Micali: Questions about the vehicle are better answered by Cadillac. Michelin worked with Cadillac on ZP fitments as well as PAX System for this vehicle.

Ultimately, Cadillac chose the Michelin ZP for its particular ride characteristics. Michelin and Cadillac agreed that PAX System, as well as ZP, is commercially and technically ready for market.

MTD: When will you make PAX readily available to the aftermarket?

Micali: It is not a question of when we will make it available, but more a question of when will there be a demand. Remember, PAX is an integrated tire/wheel/insert/sensor system. It is simply not practical to retro-fit the system to vehicles in the replacement market.

We have always looked at PAX System as a product that would be introduced through OE. As vehicles are launched on PAX System, our replacement market support for the tires on those vehicles will grow.

MTD: While we are on the subject of OE tires, we estimate Michelin, BFGoodrich and Uniroyal hold 25% of GM's domestic business. How will the parent company's recent decision not to renew its tire supply contract with GM inEurope affect that?

Micali: We anticipate no effect in the U.S. We still have contracts with GM extending into 2007. GM is a valued customer.

MTD: Michelin said it ramped up production to supply Ford with tires during its recall of Firestone tires last year. However, there were indications from dealers (foreshadowed by Edouard Michelin in MTD's August 2001 issue) that fill rates suffered. Have your fill rates improved since then? Do you have target fill rates? How do you balance fill rates between OE and replacement shipments?

Micali: Providing tires for the replacement market during the Firestone recall was a challenge for the industry, not just Michelin. While there was some disruption in OE fill rates for some sizes during that time, it was only a short-term anomaly.

Our target with fill rates is always to be above 90%. Typically, our break-out between OE and replacement is around 20% OE and 80% replacement, with minor variations year to year, and we don't see that changing significantly.

MTD: What are you doing to help independent tire dealers?

Micali: For passenger and light truck, our Alliance program is tailored to provide value and the right product mix to each individual dealer participating in the program. We are also aggressively promoting a "dealer connectivity program" to connect dealers with us and with consumers via the Web. This means helping them to get PCs and helping them establish a B2B portal with Michelin.

The "Tire Advisor" is another Michelin initiative getting good reviews from independent dealers. Not only does it give consumers comparative data during their tire shopping, it also helps them find the nearest dealer.

For truck tire dealers, we continue to enhance our e-commerce initiatives, such as Bibnet, and to provide more options for information and for electronic payment. We provide our dealers with what we believe is the very best in "multiple solutions" for the truck tire customer. A Michelin truck tire dealer who sells the full range of Michelin products and offers Michelin retreading services is the ultimate tire solutions provider.

MTD: Thank you, Jim.

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