GREENVILLE, S.C.-Michelin North America Inc. will cut its work force by 2,000 over the next two years as part of a plan to reduce annual operating costs by about $200 million.
The tire maker is launching the restructuring plan immediately to get leaner and more competitive, according to Jim Micali, chairman and president of Michelin North America in a prepared statement.
The cuts represent about 7.5 percent of the tire maker's 26,500-employee payroll.
"`We need to position ourselves for the future and cannot wait for the markets to improve,'' Mr. Micali said.
``We must get leaner and increase our focus on our core business so when the markets do improve, Michelin plans to implement $125 million in cuts by the end of 2002 and the other $75 million by year-end 2003.
The Greenville, S.C.-based company expects to make most of the reductions through voluntary programs that include a severance package and normal attrition, the spokeswoman said.
The employee cutbacks will be spread throughout its North American plants, she said, and the firm is not singling out specific jobs or locations.
``In the event of involuntary separations, however, we will act compassionately and provide a generous severance package,'' Jim Micali, chairman and president of Michelin North America, said in a prepared statement.
The $200 million figure is up from approximately $125 million Michelin said in April it would cut. Because of the downturn in U.S. tire markets and the overall economy, the firm determined an additional $75 million in savings was needed, the company said.
The $200 million cut in operating costs will ``improve our ability to weather the inevitable down cycles of the industry,'' Mr. Micali said. ``That's how we will build substantial profitability.''
The tire maker's parent, Clermont-Ferrand, France-based Group Michelin, will take a one-time charge against earnings of about $100 million in the second half of 2001 to cover restructuring charges. The company does not expect to see any cost savings in fiscal 2001.
Many employees participated in focus groups organized by nine task forces, which examined all aspects of the firm's operation and came up with the reduction plan, the company said.
Besides making work force cuts, Michelin will work to gain efficiencies in purchasing, manufacturing and sales forces, a company spokeswoman said.
Michelin has no plans to cut back on expansion plans at facilities in South Carolina, where the company is in the third year of a five-year, $400 million capital investment program.
That program includes the new plant in Lexington County for radial agricultural tires and a semi-finished materials plant in Anderson County.
``We will take care of every commitment,'' she said. ``So the expansions have been completed or are still on.''
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.