GREENVILLE, S.C. (Sept. 10, 2001) — Michelin North America Inc. will cut 2,000 jobs in the next 29 months as part of a plan to slash annual operating costs by $200 million.
The job cuts will take place throughout the organization, with implementation starting immediately, Michelin said, and will result in a one-time $100 million charge against 2001 earnings.
“We need to position ourselves for the future and cannot wait for the markets to improve,´´ said Jim Micali, chairman and president of Michelin North America, in a prepared statement. “We must get leaner and increase the focus on our core business so when the markets do improve, Michelin can take advantage of every opportunity.
“Through this cost reduction plan,” he said, “we´ll also improve our ability to weather the inevitable down cycles of the industry, That´s how we will build sustainable profitability.´´
Michelin originally announced in April it was reviewing its operations in order to trim $125 million out of annual operating costs. With the North American markets showing even greater declines than initially forecast, Michelin officials determined they needed to find $75 million more in reductions to underscore long-term competitiveness, Mr. Micali said. There will be no material savings realized in 2001, however, he added.
The job cuts represent 7 percent of Michelin's North American workforce.
“We expect to achieve almost all of the reductions through normal attrition and voluntary severance programs,´´ Mr. Micali said. “In the event of involuntary separations, however, we will act compassionately and provide a generous severance package.´´
Since announcing its intention to trim costs, Michelin set up nine task forces to examine all aspects of the company's operations and to recommend changes. Throughout the process, employees were asked to contribute suggestions and participate in focus groups.
The job cuts will affect every aspect of Michelin North America and won't target any one job classification, location, state, province or region, the company said.
The company is targeting $125 million in operating cost reductions next year, and $200 million by 2003 and beyond.
During the first half of fiscal 2001, Michelin reported a 9-percent drop in operating income, to $442.3 million, while sales grew 4.5 percent to $6.95 billion.
In North America, Michelin reported 4.6-percent growth in replacement car and light truck tire sales, offset partially by 10.4-percent drop in original equipment sales. Truck tire sales overall fell 30.7-percent.
Despite the relatively low growth, Michelin said it gained market share in North America as the replacement market declined 2.3 percent and OE sales fell 12.5 percent in the period.