Falling sales data sealed plant’s fate

Michelin’s board was digesting falling sales data as they debated the future of the Dundee tyre plant.

The latest financial information produced by the company shows a 5% decline in demand for passenger car and light truck tyres in Europe in the third quarter of the year.

The category relates to the 16-inch and below tyres produced at the closure-earmarked Baldovie plant, but also includes larger 18-inch and above sized products produced at other global Michelin manufacturing sites.

The group has cited structural market decline for smaller tyres and a flood of cheap Asian imports as reasons behind the decision to shut the Dundee site in 2020.

However, Michelin still expects to produce structural cash flow of €1.1bn this year and to grow that figure out to €1.6bn by 2020.

The group’s structural cash flow in 2017 was €1.5bn.

“Given the significant decline in the passenger car and light truck and truck tyre markets late in the third quarter and the further weakness expected in the fourth quarter, the group has revised its 2018 markets scenario, notably in China,” Michelin said in its trading update for the nine months to September 30.

As a result, it now expects a slight increase in overall volumes for the full year, with improving demand for larger car tyres of 18-inches and above offseting smaller tyre volumes.

It added: “Fourth-quarter performance will be driven by sustained market share gains in the 18-inch and larger segment of the passenger car and light truck business and in the speciality markets. Full-year volumes will be affected by the major price increases already introduced to offset the sharp currency depreciation in emerging markets.”

The financial information was released publicly on October 18, nine days after Michelin’s board had privately made its decision to close the Dundee factory.

Michelin also reaffirmed its commitment to delivering €1.2bn in savings through its “competitiveness” plan in the three-year period from 2017-20.