MICHELIN - 2008 ANNUAL REPORT

Streamlining inventory and logistics
costs in Europe while enhancing
customer service: this is the reason
behind the construction of a major
logistics hub in the Valenciennes (France)
area; the project’s second phase
was commissioned in April 2008.
Facilitating reorganizations
Improve performance while assuming its responsibilities: a choice that
guides Michelin’s approach. In the event of reorganizations, Michelin
proposes to each employee concerned either internal reclassification
solutions or individual support. Such measures are launched 8 to 12
months ahead of closure in order to ensure proper preparation to change.
Simultaneously, Michelin strives to create new jobs in the regions where
it operates. Michelin has created a network of ten Michelin Development
companies in charge of this mission across Europe and North America.
For instance, immediately upon announcement of closure of the Toul
plant (France), Michelin committed to creating 900 jobs by 2012 to make
up for the 826 job losses and to reconvert the site. This is already home to
a Customer Relations Center that has created 150 new jobs since February
2009 and plans to offer an additional 100 jobs in 2011. 100 to 140 more
jobs will be created by 2012 under a project in partnership with
a subsidiary of Suez Environnement to develop and manufacture new
materials derived from recycling.
33 job creations are also planned within 3 years in connection with SETIA’s
maintenance and industrial engineering activities, plus 44 jobs under
the redeployment of Wig France and Carpentier Constructions.
28 2008 Michelin Annual Report
Strengthen competitiveness
In 2006, Michelin launched ’Horizon 2010’,
an ambitious program to improve its
competitiveness. The objective: achieve
overall EUR 1.5 to 1.7 billion worth of cost
savings by 2010 (1) through:
• EUR 700 – 800 million industrial cost savings;
• EUR 500 – 550 million raw material cost
savings;
• EUR 300 – 350 million selling, general,
administrative and logistics cost savings.
Half-way through the program, the Group
is in line with its objective. In the 2007-2008
period, it achieved EUR 511 million cost
savings, breaking down as follows:
EUR 188 million in industrial operations,
EUR 151 million in raw material spending
and EUR 172 million in selling, general,
administrative and logistics expenses.
Industrial productivity gains were negatively
impacted by the sharp decline of production
in the fourth quarter 2008. In a “normal”
environment where industrial production
would have been up 2.5% in the second half
2008 versus the second half 2007, industrial
cost savings would have reached EUR 292
million over two years, as opposed to the
EUR 188 million reduction actually achieved.
Michelin therefore continued to implement
its productivity improvement measures in line
(1) Aggregate at constant scope and exchange rates.
with its objectives and will fully enjoy the
benefit of this progress as soon as its
industrial capacities are again used in optimal
conditions.
Optimizing the Industrial Base
Michelin is optimizing its industrial
infrastructure in order to assure a robust and
profitable base in the developed markets.
This program hinges on three aspects:
• concentration of industrial capacity to
create large, specialized plants, using more
flexible, standardized and streamlined
production processes;
• deployment of best practices and thorough
improvement of processes and organizations;
• natural attrition of nearly 30,000 employees
in the 2008-2012 period, to be only partially
replaced.
In Western Europe and North America,
Michelin adjusts its investment plan to the
weakening automotive and tire markets:
• Specialization of the Bourges (France) plant
in Aircraft tire manufacturing, specialization
of the Lasarte (Spain) plant in Motorcycle
tires and semi-finished products, closure at
the end of 2008 of the Toul (France)
Passenger Car and Light Truck tire plant.
• Modernization and reorganization of Italian
operations: Cuneo will become Europe’s