(AOF) – Michelin announces that after the signing of the NAO agreement (mandatory annual negotiation) following two negotiation sessions on January 24 and 25, all categories of personnel, agents (production operators and employees, collaborators (technicians and supervisors) and executives will benefit from a 5% increase. The NAO 2024 “is part of Michelin’s dynamic remuneration policy in France over the long term, with particular attention paid to the power of “purchase of employees at the first salary levels”, it is specified.
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Key points
– World leader in tires with 1/5th of the market, born in 1889;
– Group organized into three divisions generating €28.6 billion in sales: automotive (49%), road transport (26%) and specialty activities – mining, agriculture, construction, aircraft, etc.;
– 3/4 activity carried out on the replacement tire market, less cyclical than “original equipment” and less sensitive to the health of automobile manufacturers;
– Business model on 3 pillars: in the tire, around the tire with connectivity and beyond the tire (flexible composites, biosourced, 3D printing and hydrogen mobility);
– Company limited by shares controlled by the founding family (4% of the capital and 5.17% of the voting rights), Barbara Dalibard chairing the supervisory board of 11 members and Florent Menegaux chairing the management;
– Healthy balance sheet, rated A – debt ratio of 25.6% – but negative free self-financing of €180 million due to cost inflation penalizing working capital.
Challenges
– 2030 strategy: annual increase of 5% in sales and return on capital invested of more than 10.5% from 2023, decline towards 70% of tires in revenues, the rest coming from applications, hydrogen mobility systems and connected, fleet management, precision polymers, etc.;
– Innovation strategy led by the president:
– responding to 3 challenges – additive manufacturing, flexible composites and hydrogen mobility, – based on 5 pillars: R&D (€700 million per year in 9 centers), external, research (300) or strategic partnerships (Enviro, Vabios, addUp, Pyrowave), co-design with customers, internal innovation (100,000 ideas per year for progress and innovation coming from employees) and the incubation program,
– resulting in 1/3 of sales made in products or services less than three years old;
– “Planet” environmental strategy validated by the SBTi, aiming for total carbon neutrality in 2050 and supported by the global Movin’On ecosystem
– intermediate objective: in 2030: 50% vs. 2010,
– offer of environmentally protective tires by using recycled materials (46% in 2030 and 100% in 2050) and sustainable materials (30% in 2022),
– support for electric and hydrogen mobility via Symbio, a joint company with Faurecia,
– “4 R” circular economy (Reduce, Reuse, Renew, Recycle), boosted by disruptive technologies in partnership (Carbios, Enviro, Pyrowave, etc.);
– Strengthening the world’s No. 1 position in tires for electric vehicles.
Challenges
– Waiting for a buyer for the activities in Russia, stopped in March 2022;
– Inflation in energy, maritime transport and raw materials (rubber, carbon blacks and petroleum derivatives, i.e. 1/3 of purchases): negative impact on self-financing and costs, at a record level of 2 .7 billion €, but unit margin maintained via price increases;
– Resumption of growth in activity after the year-end calibration;
– Homogenization of markets, contrasting in 2022: sharp increase in non-tire activities, decline in tire sales due to the Russian-Ukrainian conflict and health restrictions in China;
– After 20.5% growth in sales, 2023 objective of stable operating profit of €3.2 billion and free self-financing before acquisitions of +€1.6 billion;
Negotiations with manufacturers
On average, equipment manufacturers represent between 60 to 85% of the manufacturing cost price of a vehicle. According to the Federation of Vehicle Equipment Industries (Fiev) negotiations are very tense with manufacturers regarding the passing on of the increase in costs. The price increases concern electronic components, raw materials, such as steel, nickel, lithium or palladium, energy and transport. The equipment manufacturers mainly negotiate with Stellantis and Renault to set up indices to pass on the increases. They are also betting on innovation, differentiation, moving upmarket and internationalization.