Michelin is suffering, but is not giving up. In an “uncertain” automobile market, the Bibendum saw its net profit decline by 4.63% in the first half of 2024, to reach 1.16 billion euros. Its sales are also down by 4.2%, to 13.48 billion euros. The cause: the decline in sales volumes of cars and trucks, an increase in fixed costs and an overall underloading of factories, the tire giant detailed in a press release.
Florent Menegaux, CEO of the company, nevertheless welcomes the “solid performance” of the equipment manufacturer, which has managed to improve its operating profit by 13.2% of turnover. The French multinational has managed to avoid suffering a setback thanks to its selective positioning in the most profitable segments, particularly 18-inch passenger car tires, which allow it to generate more income despite a decline in activity. Michelin was also able to count on a “favorable impact of the cost of raw materials over the half-year.”
A heavy goods market in free fall in Europe
In a confused economic context, Michelin does not rule out restructuring certain activities at its industrial sites. The group began in 2023 to reorganize its production in the face of what it denounces as unfair Asian competition on truck tires, due to overcapacity: activities will stop in Poland, Germany, China and the United States in this segment. The factories concerned are closing their doors or are being directed towards other productions. The results of these actions are not yet visible, Florent Ménégaux explained to investors, explaining that production is gradually decreasing or increasing depending on the sites, without going into further detail on the subject.
“Other countries will be affected,” said the leader, who continues to analyze the situation, particularly in Europe. On the Old Continent, the passenger car and heavy goods vehicle tire markets are doing poorly in original equipment. Over the first six months of the year, the former recorded a 5% drop while China increased by 5%, driven by car exports. The latter is down 17%. The Michelin leader regularly criticizes the decline in European competitiveness since the pandemic, against a backdrop of rising labor and energy costs.
Fears over three French factories
In France, trade unions have expressed concerns about the future of the Michelin factories in Cholet (Maine-et-Loire), Tours (Indre-et-Loire) and Vannes (Morbihan). The CFDT considers that “the situation is worrying, with extremely low workload rates, particularly at the Vannes site. (…) Considerable efforts such as workforce reductions – not quantified to date – may be necessary to maintain the sites’ activities.”
Michelin, which expects to face roughly the same difficulties in the second half of the year, has not changed its earnings forecasts for 2024, counting on operating income from the sectors of more than 3.5 billion euros at constant exchange rates, and free cash flow before acquisitions of more than 1.5 billion euros.
Source: www.usinenouvelle.com
