Compagnie Générale des Établissements Michelin

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Compagnie Générale des Établissements Michelin

12, cours Sablon
63000 Clermont-Ferrand
France
Telephone: ( + 33) 4-73-98-59-00
Fax: ( + 33) 4-73-98-59-04
Web site: http://www.michelin.com

Public Company
Incorporated: 1889 as Michelin et Compagnie
Employees: 128,122
Sales: ($14.88 billion) (2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: ML
NAIC: 326211 Tire Manufacturing (Except Retreading)

Compagnie Générale des Établissements Michelin (Michelin) is the world’s largest tire company, and one of the largest auto wheel manufacturers. Still controlled by the founding Michelin family from French headquarters, it is an international operation with outlets in 170 countries. It owns about 80 manufacturing plants located in 19 countries across four continents; rubber plantations in Brazil and Nigeria provide part of the company’s raw materials requirements. The company produces tires and other products under the Michelin, BF Goodrich, Kleber, Taurus, Uniroyal, and other brand names, and also operates tire service centers under the Tyre Master and Euromaster brand names. The company’s related products include wheels and wheel assemblies and suspension systems for automobiles, trucks, tramways, airplanes—including the Concorde—and other vehicles. Michelin is also a notable publisher of maps and guides, of which it sells 18 million per year. Although accounting for only a small proportion of its revenue, these items have immense promotional value. The stars awarded to restaurants by Michelin Guide Rouge inspectors are among the most coveted accolades of European haute cuisine. The company is led by Edouard Michelin, taking over from his father, François Michelin, and by René Zingraff.

Rubber Tire Pioneer in the 19th Century

As a tire company, Michelin dates back to the 1880s, when the original Michelin brothers, André and Edouard, took over a rubber products business created by their grandfather, Aristide Barbier, and his cousin, Edouard Daubrée. This firm’s premises were in Clermont-Ferrand, in the Auvergne. Set up in 1830 to manufacture sugar, the Daubrée-Barbier enterprise had diversified into rubber a couple of years later at the instigation of Daubrée’s Scottish wife, Elizabeth. As a child, Elizabeth had played with rubber balls made by her uncle, Charles Macintosh, an inventor who pioneered the use of rubber in waterproofing clothes, and gave his name to rubberized raincoats. A rubber workshop was opened at Clermont-Ferrand, and was soon making not only these balls, but also other rubber products, including hoses and drive belts.

After the death of the original partners, the firm, then also manufacturing agricultural equipment, was run for a few years by a manager. Business had declined by 1886, when the 33-year-old André Michelin stepped in. He was already an entrepreneur in his own right, making picture frames and locks in Paris, and under his management the Clermont-Ferrand enterprise took a turn for the better. However, André sometimes had to attend to his Paris shops at the expense of Clermont-Ferrand. In 1888, Andre’s brother Edouard, six years his junior, was prevailed upon by the family to abandon his fine arts studies and come to Clermont-Ferrand. The following year, the firm, whose most successful line was then rubber brake pads for horse-drawn vehicles, was incorporated as Michelin et Compagnie.

It was in this same year, 1889, that a cyclist arrived at the workshop asking to have a punctured Dunlop tire repaired. Pneumatic tires, first patented in 1845 but not commercially exploited at the time, had been reintroduced in 1888 by Scotsman John Boyd Dunlop, but were still rare enough to be a curiosity as solid ones were the norm. Edouard Michelin found the repair a major undertaking, involving three hours’ worth of work followed by an all night drying session. The repair did not hold, but Edouard, struck by the comfortable ride that the troublesome tires gave, set to work on a design that would retain the comfort without the trouble. In 1891 the workshop patented a detachable tire, repairable in minutes rather than hours. That fall the brothers persuaded a cyclist to demonstrate their tires in a 1,200-kilometer race. Michelin’s rider sustained five punctures on the first day. Even so, he won the race, with an eight-hour lead over the favorite. The earliest Michelin tire took 15 minutes to change, but by June 1892 the time was down to two minutes. Michelin organized another race. Nails surreptitiously planted in the road caused 244 punctures, affording ample opportunity to prove how easy repairs were. By 1893, 10,000 cyclists had fitted with Michelin tires.

The following year, Michelin launched a pneumatic tire for horse-drawn hackney carriages. The fleet of five Paris cabs that test drove the tires gained such an advantage in terms of quietness and comfort that the other cabbies were driven to sabotage. Soon even the saboteurs were converted and by 1903, 600 Paris cabs were running on Michelin tires. In 1895 Michelin announced the world’s first pneumatic tire for automobiles. Three cars, specially built to test the tire, were entered for a race in June 1895. One, the Eclair, meaning forked lightning, was driven by the Michelin brothers themselves. Despite frequent punctures, engine fires, and gearbox failures, the Eclair was a success. Only nine out of 19 competitors finished within the time allowed of 100 hours for 1,209 kilometers. The Eclair was the ninth. This was the first of many races in which Michelin tires distinguished themselves.

Around the turn of the century, pneumatic tires were becoming the norm for the automobile industry, as well as for bicycles, carriages, and cabs. Competition was intense, with 150 tire companies in France alone by 1903. Elsewhere, Pirelli, Dunlop, Goodyear, Goodrich, and Firestone were all coming along fast. A strong brand image was crucial in this climate, and Michelin had come up with a brilliant one. The Michelin man, a rotund figure composed of tires, was born around 1898. His nickname of Monsieur Bibendum came from the caption of an early poster that read Nunc est bibendum, a phrase from Horace meaning something like “Time for a drink.” The glass flourished by the convivial Michelin man contained not alcohol but nails and sharp pebbles. Michelin tires, it was implied, would gobble up such objects with no lasting ill effects. Today, Monsieur Bibendum has become one of the most widely recognized logos in the world. Apart from promoting tires, Monsieur Bibendum embellishes Michelin guides and maps. The first such publication, the Guide Rouge to France, appeared in 1900. Initially distributed free, it contained tire information together with journey planning advice, including hotel listings. Guides to Europe, North Africa, and Egypt followed as, in 1909, did an English-language edition of the guide to France. Michelin also furnished motorists with itineraries, via an information bureau.

About the same time as its foreign guides appeared, the company was opening its first foreign subsidiaries. The U.K. operation was launched in 1905, the Italian, the following year. In 1905 came the acquisition of rubber plantations in IndoChina. Meanwhile, tire technology was advancing rapidly. In 1903 Michelin introduced a tire with a sole of leather and studs of steel. Three years later came the detachable wheel rim, allowing a car to carry spare Michelin tires, as did the victor of the first ever Grand Prix, at the La Sarthe circuit. By 1913 Michelin had simplified the way wheels were attached to the vehicle, giving a neater solution to the problem of punctures. Motorists could then carry a spare wheel.

Expansion in the 1920s

Michelin was on the lookout for new applications for its tires. Around 1908 they were starting to be fitted to trucks, using twin wheels to take the heavy weight, a system tested on Clermont-Ferrand buses. Michelin linked its name to the aeronautical industry by instituting a flying competition, offering FFr 100,000 for the first pilot to complete a difficult course culminating in a landing on the peak of the Puy de Dôme mountain, near Clermont-Ferrand. Cynics said the brothers were getting free publicity by setting an impossible task, but in fact the prize was won in 1911, on the third anniversary of its creation.

When World War I came in 1914, Michelin showed a more serious side of its commitment to aeronautics by adapting its workshops to the production of bombers for the French air force. It supplied 100 bombers free and the remaining 1,800 at cost. After the war Michelin’s technological developments continued apace. In 1917 it had introduced the Roulement Universel, or all-purpose, tire with molded treads. Two years later the woven canvas infrastructure of previous tires was replaced by parallel cord plies. During the interwar period, advances in low-pressure tires dramatically extended tire life expectancy. The first hackney carriage tire had been capable of about 129 kilometers, with pressure of 4.3 kilograms per square centimeter. Thirty years later, in 1923, there was a car tire with pressure of 2.5 kilograms per square centimeter, able to cover 15,000 kilometers. The 1932 figures were 1.5 kilograms and 24,195 kilometers or more. Improvements to durability and road holding continued throughout the 1930s.

Key Dates:

1886:: André and Edouard Michelin take over rubber manufacturing business.
1891:: Company launches its first detachable pneumatic tire design.
1895:: Company launches first pneumatic automobile tire.
1898:: The Michelin man, or Monsieur Bibendum, logo debuts.
1910:: Company begins publishing road maps.
1935:: Michelin rescues bankrupt automaker Citroen, running the company for the next 40 years.
1946:: Company launches its radial tire.
1955:: François Michelin takes over company leadership.
1975:: Company opens a manufacturing plant in South Carolina.
1990:: Michelin acquires Uniroyal Goodrich and becomes the market leader in the tire industry.
1999:: Company acquires Tire Centers LLC.
2001:: Company unveils new tire design for Concorde airplane.

By 1930 Michelin was the 17th largest tire vendor in the world. Throughout the 1920s and 1930s it continued to expand overseas, with tire plants at Karlsruhe, Germany, and in Belgium, Spain, and Holland. The opening of a wire factory in Trento, Italy, illustrateci that Michelin was aware of the advantages of controlling the manufacture of components of the tire making process, as well as that process itself.

To all parts of the developed world, the interwar years brought a surge in the amount of motorized traffic. Michelin eased the motorist’s lot not only by its reliable tires but also through its guides and maps. As early as 1910 the company had started to publish road maps, the first maps of France especially designed for motorists. Now Michelin extended coverage to more European countries, and to Africa and the United States. It published a series of detailed regional guides, the forerunners of today’s Guides Verts. Michelin’s Information Bureau continued to offer free advice and itineraries, and Michelin campaigned for road numbering and signposting.

The technical advances of the 1930s included the Pilote, a car tire giving superior road holding by increasing the ratio of width to depth. In 1937 the Metallic, an innovative design reinforcing rubber with steel cords to support heavier truckloads, appeared. U.S. competitors were experimenting with synthetic rubber. Michelin, too, was researching this technology in the late 1930s, although it was not until after the war that the company began to manufacture butyl for making inner tubes.

In 1935 Michelin, initially in the person of Edouard’s son Pierre, went to the rescue of automobile manufacturer Citroen, then bankrupt. For almost 40 years, until Peugeot took it over in 1974, Michelin effectively ran Citroen and together the two companies made up the largest industrial group in France. Assisted by other family members, André and Edouard Michelin remained at Michelin’s helm until they died, André in 1931 and Edouard in 1940. On Edouard’s death his son-in-law Robert Puiseux took charge. Puiseux led the company through the war and on to a fertile period of expansion and innovation. The family was closely involved with the resistance movement during World War II, and several Michelins were interned in concentration camps. Andre’s son Marcel died in Buchenwald, and Marcel’s son Jean-Pierre was shot in action in Corsica. Despite these tragedies, Michelin kept going, although its German, Italian, and Czech plants were confiscated, and the factory at Cataroux, France, was crippled by Allied bombardments in 1944. Michelin had a long established policy of admitting only employees to its factories. Remarkably, although its French factories were obliged to produce tires for the Nazis, it managed to keep even the Germans off the premises. Inside, the patriotic Michelin workers were “customizing” their products for the occupying forces. Encountering the subzero temperatures of the Russian front, Michelin tires mysteriously disintegrated—but only the ones that were fitted to German vehicles.

Michelin maps were an invaluable weapon in the Allied armory. Michelin provided official maps for the French army at the outbreak of war, and more than two million were distributed to the liberating forces in 1944. The U.S. War Department reprinted the Guide Rouge for use during the Normandy landings. After the war Michelin, unlike some French companies, was free of any suggestion of Nazi collaboration. It swiftly regained its Italian and German property and reconstructed its bombed-out Cataroux plant. It declared a policy of expansion in both the industrialized and the developing world, which would be energetically pursued in the following decades. In France, many new factories would open, making not only tires but also wire, wheels, and tooling. In Italy, Germany, the United Kingdom, and other parts of Europe, existing plants would be modernized and new ones added.

Revolutionizing Driving in the 1940s

In 1946 came what is arguably Michelin’s most important single contribution to tire technology, the radial tire. Instead of a crisscross or cross-ply casing of fabric or steel cords, the radial tire casing was a single ply of cords placed across the tire, perpendicular to the direction of travel. This technology vastly improved road holding, flexibility, and durability. The radial tire, developed in secret during the German occupation, was commercially launched in 1949 as the X-tire, and Michelin had to expand its capacity rapidly to keep pace with the public demand for these tires. By 1969, 30 million X-tires per year were racing off the production lines. Michelin built on its early lead by quickly making radial tires available for more and more vehicle types. During the 1950s X-tires for trucks and earth-movers were launched. In common with other manufacturers, Michelin also began to make tubeless tires. It had patented such a tire in 1930, but had encountered some practical problems. During the middle to late 1950s, however, tubeless tires caught on, and by the early 1960s, there were tubeless X-tires.

Meanwhile, there were changes at the top of the company. In 1955 François Michelin, the 29-year-old grandson of Edouard the cofounder, became gérant, or joint managing partner, alongside head partner Robert Puiseux. On Puiseux’s retirement in 1960, François became head partner, and over the next 30 years, led Michelin to the number-one position in the world tire market. Unlike many of its European competitors, which set up agreements with U.S. manufacturers, Michelin had continued to undertake the vast majority of its research and development activities itself. François maintained this policy, and 1963 marked the opening of a new Michelin test center at Ladoux, not far from Clermont-Ferrand.

The company had been expanding steadily in Europe. Now it was time to look further afield. During the 1960s factories opened in Nigeria, Algeria, and Vietnam. Michelin also had an eye on the United States, where it had started a sales office in 1948, targeting owners of foreign cars. In 1965, however, Michelin entered into a contract with Sears, Roebuck to supply replacement tires for U.S. cars. So successful did this venture prove that by 1970 Michelin was selling 2.5 million tires per year through its own U.S. outlets. Overcapacity was felt in the European tire market during the 1970s, but Michelin pursued its expansion elsewhere. In the United States it constructed its first manufacturing plants in South Carolina and also built plants in Canada and Brazil. Much research continued to go toward perfecting radial technology. During the mid-1960s the XAS tire made the radial concept available to the fastest cars. Radial tires would achieve the ultimate cachet in 1979 when they helped Jody Scheckter drive his Ferrari to victory as the Formula 1 World Champion. In the 1970s, Michelin targeted several new product lines at the long distance road haulage market. With the introduction of radial tires for aircraft in 1981, and motorcycles in 1987, Michelin could offer radial technology for virtually all types of vehicles. The basic technology continued to improve, with new ranges being launched almost every year. The M series, which appeared in 1985, offered a completely new range of state-of-the-art radial tires. Among these, the MXL became Europe’s best selling tire by 1990, when its replacement, the MXT, was introduced.

Market Leader for the New Century

In 1960 Michelin had been the 10th largest tire manufacturer in the world, but by 1980, it was second only to Goodyear. In 1990 came a major acquisition, that of the U.S. tire company Uniroyal Goodrich, which made Michelin indisputably the market leader. Unfortunately, the Uniroyal deal was concluded just as a major recession hit the automobile and tire market. Faced with a FFr 5.27 billion loss for 1990, Michelin in April 1991 had to cut costs by laying off 15 percent of its workforce. This, not the first but the largest round of job cuts during that period, was an especially painful step for an employer that had encouraged its workers to see themselves as participants in the enterprise. François Michelin told the press that the main problem was not the acquisition of Uniroyal, but pressure from the automobile industry which in the past decade had forced tire prices down by 50% in real terms. In 1991, despite the pessimism expressed by some analysts about Michelin’s prospects, the company itself was looking forward to reaping the benefits of the Uniroyal acquisition when the economy emerged from recession. The strengths of the two companies in the U.S. replacement tire market were complementary, and North America represented more than one-third of the total tire market. Michelin also planned to build on its footholds in Japan, Thailand, and South America.

Michelin continued to innovate and expand during the 1990s. The company targeted the booming Asian markets for expansion—going head-to-head with Japan’s Bridgestone and other major tire makers. After the opening of its first joint-venture factory with Thailand’s Siam Cement in 1988, Michelin’s presence in that country increased, adding new factories in 1992 and 1993. The two companies opened a fourth factory in the Philippines in 1995. A year later, Michelin entered China with a joint venture with Shen Yang Tire Factory, opening a new plant in Shen Yang.

In Europe, Michelin established its Euromaster service center chain, acquiring a number of existing chains across Europe and converting them to the Euromaster format, launched in 1991. Michelin moved deeper into Eastern Europe, buying the largest tire manufacturer in Poland, Stomil-Olsztyn, in 1995, followed by leading Hungarian rubber producer Taurus, in 1996. One year later, Michelin enhanced its wheel production with the acquisition of Germany’s Kronprinz GA. In the United States, meanwhile, Michelin recovered from the recession and, with its Michelin, Goodrich, and Uniroyal brands, captured one of the leading shares of the U.S. tire market.

On the consumer front, Michelin introduced the “green tire” in 1992, capable of reducing pollution and increasing fuel efficiency. Later in the decade, the company unveiled its revolutionary new PAX tire and wheel “run-flat” system, capable of rolling for as much as 80 miles after a puncture. In 1999, the company debuted a tubeless tire for mountain bicycles. The company boosted not only its automobile tires, but also its heavy vehicle tires—in 1998, Michelin opened a new facility in South Carolina to produce “Earthmover” tires, such as the 3.92 meter tall low-pressure tire capable of supporting loads up to 600 tons. The following year, Michelin boosted its U.S. presence and extended its service operations with the acquisition of Tire Centers LLC, the leading independent tire distributor in the United States. In 2001, Michelin’s tire expertise triumphed again when the company unveiled a new tire design for the Concorde jet, which had been grounded after an accident two years earlier.

François Michelin formally appointed youngest son Edouard to take over leadership of the company, in 1999; the elder Michelin, who had by then reached the retirement age of 72, nonetheless extended his own contract to remain with the company for another three years. The following year, the massive recall of more than 4.5 million Firestone tires in the United States opened a new opportunity for the French company. Michelin ramped up production to help fill the gap left by its U.S. rival, and along the way managed to win contracts to outfit a number of new car designs. Yet the boost proved shortlived—by the middle of 2001, the dip in the U.S. economy, responsible for a dramatic dropoff in new car purchases, sent Michelin’s U.S. revenues plunging.

In its first century, Michelin had grown with, and often ahead of, the tire industry, by a process of unrelenting innovation and improvement. Meanwhile its Bibendum figurehead ranked as one of the most important and most widely recognized logos of the 20th century. At the beginning of the 21st century, Michelin tires were to be found on motor vehicles of all kinds, on the trains of the Paris and other metro systems, and on aircraft. Worldwide, one in five tires was made by Michelin. The firm knew better than any the tough and fast changing nature of its chosen market. Having long enjoyed one of the top spots, Michelin, second only to Goodyear, showed every intention of staying there.

Principal Subsidiaries

Compagnie Financière Michelin (Switzerland; 93%) ; Manufacture Française des Pneumatiques Michelin (96%) ; Michelin Aircraft Tire Corporation (U.S.A.; 93%) ; Michelin Americas Research & Development Corporation (U.S.A.; 93%) ; Michelin Asia (Hong Kong) Ltd. (93%) ; Michelin Ceská republika sro (Czech Republic; 93%) ; Michelin Corporation (U.S.A.; 93%) ; Michelin Investment Holding Company Limited (Bermuda; 93%) ; Michelin Korea Co., Ltd. (93%) ; Michelin North America, Inc. (U.S.A.; 93%) ; Norsk Michelin Gummi A/S (Norway; 93%) ; Société d’Exportation Michelin; Société Michelin de Transformation des Gravanches (96%) ; Spika SA; Taurus Rubber Company Ltd (Hungary; 93%) ; Transityre France SA (93%) .

Principal Competitors

Bandag Inc.; Bridgestone Corporation; Continental AG; Cooper Tire & Rubber Company; The Goodyear Tire & Rubber Company; Sime Darby Berhad; Sumitomo Group; Toyo Tire & Rubber Co., Ltd; Vredestein; The Yokohama Rubber Co., Ltd.