Standard & Poor's puts Groupe Michelin's credit rating on watch

Feb. 7, 2003

Standard & Poor's Ratings Services has placed its long-term and some short-term credit ratings on Groupe Michelin and nine other European corporations "on CreditWatch with negative implications."

The action follows what Standard & Poor's calls "a ground-breaking review" of unfunded post-retirement liabilities at more than 500 rated European companies.

The analysis was based on estimates of the value of equity assets in each company's pension fund at year-end 2002, "and on the

totality of each company's unfunded post-retirement obligations." According to Standard & Poor's, it didn't matter whether the obligations were subject to regulations requiring pre-funding (as with United Kingdom-defined benefit pension plans) or funded on a pay-as-you-go basis (as with German defined

benefit pensions).

"Standard & Poor's views unfunded post-retirement liabilities as debt-like in nature, given the future call on cash these liabilities

necessarily represent, despite the difficulties of precisely valuing such liabilities and the various estimates involved," says Emmanuel Dubois-Pelerin, credit analyst for Standard & Poor's. "Moreover, Standard & Poor's

believes that the risks arising from such liabilities have increased as a result of intense public debate on stricter funding rules, a continuing rise in health-care costs, ongoing deterioration in equity values, and a

weakened global economic environment."

Michelin says there has not been any new information at the origin of the decision made by Standard & Poor’s to put its rating under watch. "This decision entirely relies on a change in the methodology of evaluation of this rating agency," according to the company.

"Group Michelin acknowledges the watch decision by Standard & Poor’s on its financial rating (BBB+, with stable outlook), granted in May 2001 and reconfirmed in April 2002, on the occasion of the 1.5 billion euro bond issued by Michelin Finance Luxembourg and guaranteed by Compagnie Financière Michelin.

Following the publication of its first-half 2002 earnings, on July 30, 2002, Groupe Michelin provided the in-depth analysis of its consolidated social liabilities (post retirement and other employee benefit obligations, among other elements…). This information is available under the "Investor Relations" section related to the accounts of the first half 2002.

Groupe Michelin will release its 2002 consolidated and audited accounts on Feb. 25, 2003. Its stock price was trading at 28.13 Euros ($30.48) as of Feb. 6.

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