HALLSTADT, Germany — Group Michelin is expanding and contracting in Germany at the same time in response to market changes in Europe that favor larger rim-diameter tires.
In the span of just a few days, the French tire maker disclosed it had converted production capacity at its plant in Bad Kreuznach to larger rim-size tires and announced plans to shut a plant in Hallstadt, which focuses on the production of smaller rim-size passenger tires, by early 2021, affecting 858 employees.
The project at Bad Kreuznach involved an investment of tens of millions of dollars over the past year to 18 months to re-equip the 53-year-old factory to the production of 18- and 19-inch tire sizes.
Michelin said the new sizes reflect market demand for larger tires in the premium segment. The investment is considered part of the Future Pact, signed by Michelin and its employee representatives to strengthen German locations amid European competition.
Closing the 48-year-old Hallstadt plant will cost Michelin approximately $185 million in non-recurring expenses, which will be reflected in the company's fiscal 2019 consolidated financial statements, Michelin said.
In operation since 1971, the Hallstadt plant is rated at 8 million tires per year, mainly 16-inch passenger car tires, demand for which has seen a sharp decline globally, Michelin said.
In addition to the structural changes in the market, the segment faces "extremely strong competition" from Asian manufacturers, according to the French tire maker.
To address this market development, Michelin said it had invested $67 million since 2013 in gradually adapting the site's production.
The tire maker said it made the decision in the absence of an "economically viable" industrial alternative, and after a consultation period with the works council.
The company now is working with the plant employees to support them in the aftermath of the closure.
The announcement comes less than a year after Michelin unveiled plans to shut down another small-sized tire production plant in Dundee, Scotland, affecting 845 jobs.