The Manufacturer gains an exclusive interview with Michelin chairman Michel Rollier following the release of the company’s strong annual results which saw it surpass €20bn revenue for 2011 and included the announcement of his upcoming retirement.
TM: You took over in 2007 and have announced that you will step down in 2012, presiding over one of the worst economic downturns in the last century, do you think Michelin have now weathered the storm?
MR: We have been doing a lot to prepare this company for the future. We have invested to reinforce our strength in product design and innovation and have built solid manufacturing foundations, redefining processes and improving productivity.
A lot of new challenges are coming up and we are well positioned to take full benefit. New EU regulations will be in action by the end of 2012, which will use a tyre grading system based on how environmentally friendly they are. We are a leader in terms of innovations that lowers CO2 emissions.
TM: You have managed to pass on higher raw material costs to customers, is there still a capacity for that?
MR: Raw material prices will plateau now. The strategy has been very effective but we have to recognise that tyres are becoming a bit expensive.
TM: Although sales for 2011 increased by 6.7% on the previous year, sales decreased in Q4, are you concerned?
MR: It was disappointing as we were expecting stronger sales, mainly in Western Europe. The other parts of the world market were close to what we were expecting, with the exception of Thailand. There are two reasons for this:
1) The original equipment for trucks has been doing well, but truck tyre replacement was seriously down, mainly in the southern part of Europe, but also in Germany and France. This drop in sales towards the end of 2011 is unexpected and was much more severe than what had been anticipated.
2) The winter time market, which is now accounts for around one third of the European market, was not at the expected level because of the mild weather in November and December 2011. Winter came too late. We had to slowdown some factories in Europe, but this was quite limited.
TM: What were the consequences of the flooding in Thailand?
MR: We did not suffer too much but there were consequences. Some suppliers had been hit by the flood, which made it difficult to get the raw materials that we need. We have customers that had factories go under water so this also had an impact.
TM: Michelin have already pledged to invest over £50m in UK factories over the next six years, will this level of investment continue?
MR: Yes. We have invested €1.7bn globally, the highest level achieved in our history, and we will grow that to €1.9bn. Out of this, 1bn will be for new development and we hope to take further advantage of a booming mining industry. The decision to build new plants has been made; the decision that remains is where.
We won’t build a new green-field plant in the UK. It is about installing better machines and using automation to increase productivity. The only investment I would like to make in the UK [laughs] is to ask Mr Terence Conran to sell us back Michelin House in London [the company’s first British site]. The size of a plant is much bigger than what it was when we built our UK plants, we will focus on increasing the output and productivity at our existing sites.
TM: Is it feasible to maintain such a high level of manufacturing in Western Europe?
MR: Michelin are convinced that we can keep the strong industrial bases in high cost, western countries. One challenge is to lower the labour costs per tyre. Michelin has made significant productivity gains over the last five years, largely through the automation of plants.
TM: Does automation mean fewer jobs?
MR: Yes, it has to. But it comes from natural wastage.
TM: A large part Michelin’s UK manufacturing is in tyre replacement services, how can it be made more profitable?
MR: We want to do better in UK in the replacement market. British customers are more cost than brand orientated so Michelin plan to grow the awareness of the brand by increasing our levels of advertising and growing our relationships with independent customers.
TM: Michelin has ambitious targets for growth, aiming to achieve 25% growth between 2011 and 2015 and 50% by 2020. How confident are you that these targets will be met?
MR: Yes. The message that we send for early 2012 is stabilisation, we then accelerate with strong growth.
TM: Tell us about your decision to retire…
MR: I could have stayed as chairman until 72; it is my decision to retire. Jean-Dominique Senard was elected managing general partner in May 2011, and since then we’ve worked together to prepare my succession. The transition is now complete ad the time has come to pass him the reins. You are in or you are out. I will keep a very close relationship with Mr Senard but he is the boss and I am not, I have to let him manage the company.”