CLERMONT-FERRAND, France — Michelin Group has found a buyer for its Russian holdings, 13 months after declaring it would cease operations there in the wake of Russia's invasion of neighboring Ukraine.
The French tire maker has agreed to sell those assets — Michelin Russia Tyre Manufacturing Co. L.L.C., including the tire factory in Davydovo, Russia, and Camso CIS L.L.C. — to Power International Tires L.L.C., a major Russian tire distributor and a Michelin business partner in the past.
The agreement, approved by the appropriate local authorities, provides an option for saving 250 jobs, mainly based in Davydovo. The option to pass the activity on to local management was not possible, Michelin said, due to "major difficulties preventing these activities from being rendered autonomous."
According to Michelin, the Russian plant has an annual production capacity of up to 2 million tires, mainly for passenger cars. The plant opened in 2004.
All costs relating to the cessation of activities in Russia — estimated earlier at roughly $263 million — have been accrued for in fiscal 2022, Michelin said.
The group will, however, recognize in May 2023 an expense estimated at a few tens of millions of dollars corresponding to currency translation differences. This expense will be recognized in the group's operating income, not allocated to the segments, and therefore will have no effect on Michelin's guidance for fiscal 2023.
Most of the output from Davydovo consists of mass-market sizes, intended primarily for the Russian market, the company said. Michelin's sales in Russia, across every segment, accounted for around 2% of Michelin's consolidated total in 2021.
Little is known about the buyer, Power International Tires, other than, according to Michelin, it is "one of the main tire distributors" in Russia with a presence throughout the country.
With this divestment, Michelin joins Continental A.G. and Nokian Tyres P.L.C. as major tire makers that have divested their holdings in Russia.
Of the four other non-Russian tire companies with manufacturing operations in Russia, Bridgestone Corp. has a pending deal to divest its holdings, while Pirelli & C. S.p.A., Titan International Inc. and Yokohama Rubber Co. Ltd. continue to operate there, albeit at reduced operating rates.
Continental sold its assets, including a passenger tire plant in Kaluga, in May to a Russian company, S8 Capital, for an undisclosed transaction price. In addition to tires, the Kaluga plant produced air conditioning and power steering lines, and the deal also included a tire distributor in Moscow.
Nokian Tyres concluded the sale of its Russian assets, including its tire factory in Vsevolozhsk, in March to Russian energy and petrochemicals producer P.J.S.C. Tatneft for approximately $307 million.
Nokian opened its Russian plant in 2005, and by 2021, the company said approximately 80% of its passenger car tires were produced in Russia. Nokian said its business in Russia and Asia represented approximately 20% of its annual net sales.
Bridgestone declared in October 2022 it would sell all of its assets in Russia, citing the lingering "uncertainties" of doing business there and untenable supply-line challenges.
The Japanese tire maker said then the process of finding a buyer and exit strategy could take several months. The tire maker is seeking a local buyer for its 200-acre tire factory and campus in Ulyanovsk.
Pirelli has suspended new investments in Russia but continues to operate "in compliance with international sanctions."
Pirelli operates tire plants in Kirov and Voronezh and supplies tires around the country through a joint distribution company. Pirelli acquired the plants in 2012; together they represent 8.3 million units of annual production capacity.
Russia accounted for 3.5% of revenue during the quarter and about 8% of production.
Titan also halted investment in its Russian operations, although the company's JSC Voltyre-Prom tire plant in southwest Russia continues to operate at lower levels in compliance with international sanctions on Russia.
Tires produced there are sold primarily into countries affiliated with the Commonwealth of Independent States trading bloc, located throughout Europe and Asia, Titan said.
