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November 03, 2015 01:00 AM

Michelin to close U.K. plant, restructure European capacity

Crain News Service
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    Michelin U.K. Ltd. photo
    Michelin's Ballymena, Northern Ireland, plant is slated for closure by mid-2018.

    By Shahrzad Pourriahi, Crain News Service

    CLERMONT-FERRAND, France (Nov. 3, 2015) – Michelin Group plans to close its Ballymena, Northern Ireland, truck tire plant by mid-2018 as part of a $410 million restructuring of its European tire manufacturing capacity that will result in more than 1,600 job cuts.

    The French tire-maker said the decision to consolidate the businesses was in response to slowdown in demand in Europe for new and retreaded truck tires.

    Separately, Michelin said it is postponing an expansion at its earthmover tire plant in India.

    “The competitive environment and the economic crisis of the past few years have lastingly affected the European tire market and, in particular, the market for new and retread truck tires,” Michelin said.

    The tire maker will reorganize activities in the United Kingdom and in Italy, which in addition to site closures, will include an investment of $410 million to modernize production and the logistics network in these countries.

    In the U.K., Michelin will be refocusing its activity on growth segments of the passenger car and light truck tire and retread markets, the company said, adding that $130 million will be invested in this strategy before 2020.

    Michelin said it was closing its truck tire factory in Ballymena in light of “difficulties the site has been experiencing for several years.”

    According to the tire-maker, very aggressive competition and manufacturing overcapacity on the truck tire market, heavy logistics costs due to plant location, and high production and energy costs were among the main challenges at the site.

    Michelin employs 860 at the site and said that an employee consultation process will begin immediately regarding the run-down proposal.

    The Ballymena site has over the years exported a large percentage of its tires to the U.S.

    In Dundee, Scotland, Michelin will invest $106 million to increase passenger adn light truck tire production by 30 percent by 2020.

    The investment will include the installation of new machinery, enabling the production of larger tires, which are a growing segment of the market. A new warehouse will be built on-site to accommodate this increased production.

    The French tire-maker will also invest $25 million in its Stoke-on-Trent, England, site, which it said has transformed its retread production facilities over the past few years as part of a new multi-brand strategy.

    The investment at Stoke and Dundee will result in the creation of 110 jobs.

    In Italy, where Michelin manufactures 10 percent of its European production, a five-year strategic plan will be implemented – affecting 578 jobs by 2020.

    The plan is supported by an investment of $275 million to further develop car, van and truck tire volumes by 2020 at its Cuneo and Alessandria sites.

    With more than 2,000 employees, the Cuneo plant is Michelin's largest passenger car and light truck tire production site and is also one of the largest semi-finished product production sites in Europe.

    The plan is to increase passenger car & light truck tire production by 20 percent by 2020, by continuing to move production upmarket to high and very-high performance tires and by significantly improving competitiveness.

    The Alessandria site with more than 800 employees will also be specializing in the production of new truck tires with the aim of a 20-percent increase in production by 2020.

    The site's retread activity, however, will cease in mid-2016, due to a sharp deterioration in the retread market, Michelin said.

    The Fossano semi-finished products site, which had already dropped production by 45 percent since 2009, will close in late 2016.

    The plant's production will be purchased from external suppliers or be taken over by the group's other facilities in Europe.

    Michelin's logistics network in Italy will be “transformed” with the aim of concentrating stock near the Cuneo and Alessandria sites.

    Warehouses in Turin and Rome will be modernized and will serve the whole of Italy, while the Tribano warehouse, which employs 28 people, will be closed in late 2017.

    In Germany, due to the serious difficulties experienced on the European retread market, Pneu Laurent will close its Oranienburg site at year-end 2016 and will consolidate its activities at a plant in Avallon, France. The site closure affects 180 employees.

    To finance these projects of reorganisation, Michelin Group will recognize a non-recurring impairment loss of around $430 million in 2015.

    In India, Michelin will postpone its project to expand earthmover tire capacity at its Chennai plant, as demand remains “severely down.” This decision will result in a $115 million non-recurring impairment loss of on the project's related assets and capitalized process engineering costs.

     

     

     

     

     

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