Michelin plans to cut 2,300 jobs in "simplification" process

Tyre manufacturer Michelin has announced plans to cut as many as 2,300 jobs in its native France over the coming three years as competitors with lower-cost products ramp up the pressure on European manufacturers in the wake of the coronavirus pandemic.

Despite being one of the world's largest tyre makers, Michelin is having to come to terms with what it describes as "profound structural shifts" in the market as cheap imports threaten European industry, nudging the company to cut costs in its domestic market and bet on higher-value products.

“We don’t have a choice. If we don't work every day on our competitive position, we will be wiped out,” Michelin chief executive Florent Menegaux told the Financial Times.

While the pandemic has devastated the demand in the car industry and created immense problems for Michelin, Menegaux said that the pandemic had merely delayed the plan's announcement. 

French operations at Michelin are to undergo a "simplification", which aims to bolster efficiency by 5% a year and is not about the closure of factories. The job cuts will be made in the form of voluntary retirement and lay-off plans.

Europe's automotive parts suppliers are having increasing difficulty in finding solid ground, finding themselves caught between the pandemic and its knock-on effects and structural changes that were already happening as the market becomes flooded with tyres from lower-cost producers.

Menegaux predicts that demand will only return to pre-pandemic 2019 levels by the second half of 2022. He also acknowledged that Michelin had been slow to act. The company had no budget offering on the market until 2016 and premium tyres still account for 80% of the company's business.

Michelin's plan is an extension of a review of its business in Europe that was launched in mid-2019 and led to the closure of two factories; one in France and one in Germany.

In September 2020, Japan's Bridgestone announced it was to close its plant in Béthune in northern France and move production to lower-cost locations despite desperate attempts by politicians to prevent it.

The same month, German automotive components supplier Continental announced plans to axe 30,000 jobs globally, with tens of thousands more still at risk among Germany's network of smaller suppliers.

Politically, the announcement comes at a difficult time, and President Macron has said his government will be watchful that Michelin keeps its promise to eventually replace every job lost, either directly in the group or in the affected local communities.

However, the job cuts provide Michelin with a chance to “reinforce” its premium tyre business and also to push further into higher-value areas such as new materials and recycling, as well as developing its hydrogen battery joint venture, Symbio. 

Menegaux says the strategy is vital for the future of Michelin and French industry. “It's like when you are in flight and when you are changing from an area of depression to a new area, you have some turbulence,” he said. “We are balancing realities. We are not abandoning France.”

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