The Group Michelin, famous for developing the radial tyre almost 50years ago during the Second World War, is the French tyre maker based in Clennont Ferrand, France. A headlong US expansion in the l970s and 1980s gave Michelin a string of 13 North American manufacturing sites with headquarters based in South Carolina, including the 1990 acquisition of Uniroyal Goodrich Tire Co. in a debt-financed acquisition. This activity transformed Michelin from a medium sized European tyre maker into the world’s leading producer after Bridgestone, Japan..
Today, Michelin has production facilities in many countries and sales and service outlets covering over 170 countries. Where there are no production facilities (Australia for example), Michelin has a significant import operation. By 1991, debt from expansion put the company into deep financial trouble. Costs were getting out of control. The company was getting complaints from valued customers and distributors such as Sears Roebuck & Co, Michelin’s biggest US distributor. Sears Roebuck’s complaint was too slow deliveries, so that they then started buying more tyres from Goodyear, one of Michelin’s competitors.
By the end of 1993 Michelin’s debt was more than double equity. Franqois Michelin, the head of the company has put his son, Edouard Michelin, in control and started to make cutbacks in all sites including the US, and European manufacturing operations in Belgium, Britain, Germazty Italy, Netherlands, Spain and its home base in France. Some of Michelin’s problems grew from the need to keep quality uniform during the expansion. French systems, that were transferred to US plants, were simply not understood by US employees.
Eager for discipline, the company sometimes hired former military people in the US. To protect what it considered superior technology and process methods, it guarded secrets even from employees. Many decisions were centralised, which made it difficult to control costs. Big customers had trouble getting Michelin’s highly structured manufacturing plants to respond to unexpected orders. On 21 February 1997 Michelin announced redundancies of 1445 jobs in France which brings the total decline in the tyre-maker’s workforce since 1990 to 25,000 or almost one job in five.
Some 700 of those who lose their jobs will be given part-time work, or work at other Michelin factories. However, this will not save the reputation of the firm that once took pride in looking after its workers from cradle to grav. After seven difficult years, Michelin understands that it must turn itself from a smug and lumbering national champion into a general multinational firm. Tyres are made up of over 200 components and worldwide about 700,000 tyres are produced per day.
There are about 10,000 references to finished products. In addition to tyres, the company also makes some of the wheels and, of course, publishes the famous Michelin Guides, although these two segments only constitute about 2 percent of the business. Michelin has large research facilities, and road circuits for testing tyres in France and the USA. A new technology process, C3M, is a machine for making tyres that will also reduce both labour and inventory levels, two areas in which Michelin currently outspends its competitors.
Michelin is very vertically integrated, making everything including the synthetic rubber, the steel bands in the tyres and even the machines which are used to assemble the tyres. It also owns some of the rubber plantation plants in Brazil and Nigeria. For tyres that are used in heavy service about half the rubber is natural. Michelin serves every market segment, including agricultural machinery, two-wheeled vehicles, aeroplanes, heavy earth-moving equipment, trucks, cars, buses and all tourist vehicles. Tyre sales enter into two markets, first-mounted and replacements.
First-mounted are on new vehicles and this constitutes about one third of the business. For this, the market clients are the automobile constructors (Renault, Ford, GM, Groupe PSA, etc. ) Replacements, approximately two-thirds of the business, are sold through distributors, such as Carrefour, Intermarchi?? and LeClerc in France as well as specialized auto stores. After-sales service is very important in tyre sales. This includes advice on technical information, communication, stock levels for future sale, and billing.