French tyremaker Michelin plans to cut up to 2,300 jobs in France over the next three years as lower cost competitors ratchet up pressure on European manufacturers in the wake of the pandemic.
Michelin, one of the world’s biggest tyre manufacturers, is facing what it calls “profound structural shifts” in the market with waves of cheap imports threatening European industry, prompting the company to cut costs in its home 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 Covid-19 has crushed demand across the car industry and heaped pain on Michelin, Mr Menegaux said the pandemic had only delayed the announcement of the new plan.
The “simplification” of Michelin’s French operations will aim to boost efficiency by 5 per cent a year and is not based on factories closing. The job cuts will come through voluntary retirement and lay-off plans.
Europe’s car parts suppliers are caught between the pandemic and structural changes that were already under way as budget tyre producers flood the market.
Mr Menegaux estimated that demand would only come back to 2019 levels before the coronavirus crisis by the second half of next year.
He said that stress was increasing in the premium part of the market too. Michelin did not have a budget offering in place until 2016 and about 80 per cent of its business remains in premium tyres.
Michelin’s plan is the extension of a review of its European business launched in mid-2019 that saw the group shut a factory in La Roche-sur-Yon in the west of France and another in Germany.
Japan’s Bridgestone also said it would close its Béthune plant in the north of France and shift production to lower cost sites, despite desperate interventions by French politicians.
In Germany, car-parts supplier Continental plans to cut up to 30,000 jobs worldwide and tens of thousands more are at risk throughout the country’s network of smaller suppliers.
The timing of the Michelin announcement is painful for the French government, which is battling to keep employment in check during the pandemic and trying to “reshore” industry.
President Emmanuel Macron has said the pandemic will fundamentally alter globalisation and has committed €1bn to helping companies produce in France.
A spokesperson for Mr Macron said on Wednesday that the government would be vigilant over Michelin’s promise to eventually replace every lost job, either in the group or in the local communities affected.
The flip side of the job cuts for Michelin is a push to “reinforce” its premium tyre offering and an attempt to press further into higher-value areas such as new materials and recycling, as well as developing its hydrogen battery joint venture, Symbio.
Mr Menegaux says the strategy is crucial 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.”
Additional reporting by Joe Miller in Frankfurt