Investment firms are divided on the health of Michelin

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Should investors buy or sell Groupe Michelin's stock? It depends on the investment company -- and even then there is uncertainty.

On Sept. 11, UBS upgraded Michelin's stock from "neutral" to "buy" as raw material prices dropped.

On Sept. 6, Merrill Lynch analyists reiterated their "buy" rating on Michelin. In addition to raw material price decreases, they cited Michelin's desire to "accelerate its productivity improvement and cost reduction programs."

On Sept. 5, HVB downgraded Michelin's stock from "outperform" to "underperform," in part because consumer tire shipments in North America and Europe are down more than expected.

In early August, Standard & Poor's Rating Services lowered Michelin's long-term corporate credit rating from "BBB+" to "BBB," and its short-term corporate credit rating from "A-2" to "A-3."

Quoting S&P credit analyst Barbara Castellano, AFX News Ltd. said the negative outlet is a reflection of the "gradual deterioration of the company's financial-risk profile in recent years, coupled with our expectation that credit protection measures and cash generation will not return to the levels required for a 'BBB+' rating in the intermediate term."

The ratings could go lower if Michelin "does not demonstrate that it is on track to achieving these medium-term financial targets."

Conversely, the outlook could revert to "stable" if Michelin "meets the given targets and demonstrates its ability to maintain such levels."

Michelin's stock was selling for $68.21 a share at the close of the European stock exchange on Sept. 12, 2006. The stock was selling for $56.21 share entering 2006.

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