Michelin North America Inc. and Goodyear both are making tire production cuts.
Michelin plans to reduce capacity at six plants in the U.S. and Canada in the coming weeks and months to reduce inventory in response to what it called “unprecedented deterioration in market conditions, particularly in the original equipment markets.”
The tire maker said its “priorities in this crisis are respect for employees, as well as the long-term health of the company.” Most of the cuts relate to OE supply and will take place at:
* Greenville, S.C. (passenger and light truck tires): 45 production contractors will be released during February; beginning March 1 and continuing for four weeks, 870 wage employees will have their schedules reduced by approximately 10 hours per week.
* Lexington, S.C. (passenger and light truck tires): production will be reduced through the end of March; available employees from the passenger tire factory will be used to fill open positions at the company's earthmover tire production on the site; 43 contractors will be released.
* Ardmore, Okla. (passenger and light truck tires): 120 contractors were released mid-November; beginning Feb. 13 and continuing for eight weeks, 1,455 wage employees will have their schedules reduced by 12 hours every two weeks.
* Spartanburg, S.C. (truck tires): 32 production contractors and 15 mechanical contractors were released in November and December; beginning the week of Feb. 8 and continuing for eight weeks, 835 wage employees will have their schedules reduced to an average of 35 hours per week.
* Opelika, Ala. (BFGoodrich- and Uniroyal-brand passenger, light truck tires): fewer than 80 production employees were to be laid off, effective Feb. 14; the cuts represent about 5-6 percent of the firm's 1,400 employee work force. The 46-year-old, unionized plant's capacity is listed as 14,000 tires daily.
* Waterville, Nova Scotia (truck, small over-the-road and earthmover tires): 95 flex employees will be laid off temporarily, effective April 1; since January 2008, the company has reduced one 12-hour shift every four weeks for flex employees and eliminated overtime for full-time employees.
Michelin said it “remains a healthy company on sound financial footing,” but further actions may be necessary.
Goodyear
Meanwhile, Goodyear is curtailing manufacturing at several international plants, broadening by more than 50 percent a series of production cutbacks in North America announced recently in response to weak demand.
The newly announced cutbacks—at as-yet undisclosed plants in Asia and Latin America—will raise to nearly 17 million units the amount of annual production cuts the company is scheduling this year, Darren Wells, executive vice president and CFO, told a JP Morgan Chase & Co. conference in Miami.
“It is widely known that the economic slowdown is having a considerable impact on consumer demand and industry volume,” Mr. Wells said. “Fourth quarter industry volumes were well below expected levels, prompting a significant increase to our production cuts that now extend across all business units.”
Goodyear's plans for a series of partial shutdowns through March at its North American tire plants comprise about 11 million units of production, the firm said.
The tire maker also continues to deal with high raw material costs, which Mr. Wells said were roughly 13 percent higher last year than in 2007 and should keep rising throughout the first quarter before peaking. Much of the increase came in the fourth quarter, which was up more than 25 percent.
Goodyear said North American consumer replacement tire shipments fell about 3.5 percent last year from 2007 with OE shipments down 22 percent. Commercial tire replacement and OE shipments were down 11 and 18.5 percent, respectively.