Group Michelin is forecasting an improvement in its operating margin for this year, despite a ``challenging'' first-half outlook and ``poor visibility'' for the second-half economic climate.
For fiscal 2001, Michelin reported a 10.5-percent drop in operating income, to $951 million, as a number of negative economic factors took hold throughout the year, including: a ``brutal'' deterioration of trucking activity in North America; a depressed passenger/light truck market in North America; a ``dull'' European replacement market; the continued negative effects of high raw materials costs; and the continued drop in the value of the euro to the dollar. Net income fell 28.1 percent, to $280.3 million.
Michelin said its 2002 forecast-for an operating margin of between 6.7 and 7.4 percent, vs. the 2001 margin of 6.6 percent-is based on stable oil prices and euro value, rationalizations under way at various Michelin operations. The positive effects of higher prices and lower inventories also are factored into Michelin's 2002 outlook.
Rationalization programs are expected to yield $125 million of savings in North America and up to $22 million in Europe, Michelin said.
In North America, Michelin has reduced employment by 500 jobs since September, putting it on target to achieve the cost-reduction goals it made public at that time.
The tire maker said it intends to reduce its North American workforce by about 2,000 by year-end 2003, as part of a drive to cut annual operating costs by $200 million. These first cuts came through normal attrition and voluntary severance programs.
``Through this cost-reduction effort, we'll improve our ability to weather the inevitable down cycles of the tire industry and build sustainable profitability,'' said Jim Micali, chairman and president of Michelin North America Inc., in a prepared statement.
Employment stands at 26,500.