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Michelin to Shut Plants


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WSJ / June 10, 2013

PARIS—Michelin said on Monday it would close a truck-tire factory in France and another in Algeria as Europe's prolonged economic downturn punctures demand for new trucks and replacement tires.

The family-controlled French tire maker will book a €135 million (US$178.5 million) restructuring charge in the first half as it concentrates its truck-tire production at its remaining French facility.

Demand for truck tires in Europe is running 25% below the pre-crisis level of 2007, said Michelin, whose tire plants are operating at about 60% of capacity.

World-wide demand for tires from truck makers also is down, falling by 1% overall in the first quarter. Markets in Europe, North America and the Middle East and Africa were down 3%, 12% and 18%, respectively, in the period, according to Michelin's estimates. However, the South American market expanded by 23%. Michelin's truck-tire sales fell 5.6% by volume and 8.6% by value world-wide in the quarter.

Overall sales of heavy-goods vehicles for the year's first four months fell 14%, according to the Association of European Auto Manufacturers. Swedish truck builder Volvo AB's truck deliveries in Europe were down 7% in April from a year earlier. MAN AG, the German truck maker controlled by Volkswagen AG, warned earlier this month that it won't hit its profit-margin targets partly because of Europe's economic malaise.

The Michelin announcement comes at a sensitive time in France as the Socialist-led government of President François Hollande is under pressure to reverse a trend of rising unemployment as economic growth stalls. Michelin ran into a political storm when it announced job cuts in 1999 during the previous Socialist-led administration of then-Prime Minister Lionel Jospin.

"Michelin is determined to maintain a strong and lasting industrial presence in France," the company said. But it intends to continue to reorganize its industrial operations in France by consolidating plants.

The tire maker said it plans to pump €800 million into its activities in its home country through 2019 by developing other production sites, with €220 million earmarked for its research and development center at Clermont-Ferrand, in central France.

Michelin said it would close its truck-tire plant at Joué-lès-Tours, in central France, and shift the factory's production to another French plant at La Roche-sur-Yon, where the company will invest €100 million to retool and raise production capacity to 1.6 million tires a year, of which 75% will be exported.

The Joué-lès-Tours plant employs 930 workers, of which 200 will be kept on to work on semi-finished products. Of the remaining 730, 250 will be offered early-retirement options and the remaining 480 will be offered jobs at other Michelin facilities. Those who decline will be offered training to find other jobs.

Michelin said it is closing its truck-tire plant in Algeria, which will be sold to Cevital, a private company. The French tire maker said the plant is too small to be competitive and doesn't have room to expand.

Michelin recently confirmed its full-year objectives for 2013. It aims to achieve stable operating income before nonrecurring items, a more than 10% return on capital employed and positive free cash flow.

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