AKRON-Group Michelin always has been a company shrouded in mystery. But even more mysterious are its plans for U.S. subsidiary, Michelin North America Inc.
The parent firm recently committed up to $900 million to the North American unit to boost capacity at three South Carolina plants and build an off-the-road tire factory in the state.
These moves have one industry observer scratching his head.
``In the North American market we're entering a period of relatively stable market share,'' said Dave Meyer, a management professor at the University of Akron.
Goodyear, Bridgestone/Firestone Inc. and Michelin North America probably will maintain their current pieces of the tire pie-and the size of the pie likely also will remain the same, he said.
The South Carolina-based subsidiary virtually has nothing to gain by increasing its capacity, he said.
``It's pitting heavyweight No. 1 (Goodyear) against heavyweight No. 2 (Michelin North America), and unless someone makes a mistake, nothing will happen (to change the market share),'' Mr. Meyer said.
This, he added, leaves Michelin North America with three options: plant closures; lowering output and employment at several plants; or exporting more.
``There's already enough capacity to go around,'' Mr. Meyer said. ``I'm surprised (Michelin) is adding output, especially if (its) debt structure is what I believe it to be. Just two or three years ago they were howling (`debt').
``Can the market absorb all this additional capacity? No,'' he said. ``I foresee closures at some of Michelin's union plants with older equipment.''
Michelin prefers the flexibility of non-union facilities where they can move people around to different jobs and tailor their employment roster to their needs, he said.
``I would not be surprised to see unionized plants close before the non-unionized plants,'' Mr. Meyer said. ``It would be stupid to forego the option of closing facilities. They used the threat of closure very effectively to get (changes in contracts in Tuscaloosa and Opelika, Ala., and Fort Wayne, Ind.). They play a pretty hard game like that.''
The Fort Wayne plant is No. 1 on Michelin North America's list of plants to close, Mr. Meyer said. ``They view it as a thorn in their side,'' he said. ``That's where the strike was. That's the least cooperative plant as far as Michelin is concerned.
``The only thing keeping it open is location,'' Mr. Meyer said. ``Its strategic location helps (reduce) some shipping costs.''
Michelin doesn't have to go as far as Bridgestone/Firestone in terms of hiring permanent replacement workers, he said.
The problem is the French tire maker can ill afford, from a public relations standpoint, to close its union facilities in North America, he said.
``Bridgestone/Firestone is an absolute lightning rod, politically, and it will stay a lightning rod in Washington,'' Mr. Meyer said. ``If Michelin closes its Uniroyal Goodrich plants, it will draw heat away from Bridgestone/Firestone. Come November, we'll probably still have a Democratic president, then closing the union plants won't be an option.''
Using the additional capacity to produce tires for export is another possibility.
The variable in this equation may be China. With an exploding population and fledgling infrastructure, China has enormous potential.
While the other major tire makers jockey for position in China-forming joint ventures and building factories-Michelin remains suspiciously absent. The French tire maker's lack of presence has the industry wondering what Michelin will do.
Shipping tires to the Pacific Rim from North America is a remote possibility ``because Michelin is not doing anything else in China,'' Mr. Meyer said.
``Whatever they're doing, I'd have to say it's well thought out,'' he added. ``They don't make mistakes.''