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Optimal Tire Performance Balance: Our Core Competitive Advantage

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Optimal Tire Performance Balance: Our Core Competitive Advantage SEEN FROM WITHIN IN THE NEWS IN CLOSE TOUCH WITH YOU The Racing Michelin at the Registering your shares Spirit Frankfurt Auto Show with the Company Page 3 Page 6 Page 8 ISSUE No 03 Horizons OCTOBER 2009 MICHELIN’S LETTER TO ITS SHAREHOLDERS TOPICAL REVIEW EDITORIAL Optimal tire Dear Shareholder, I am pleased to have this performance balance: opportunity to share with you the Group's strategy during these our core competitive difficult times. At the beginning of 2009, we advantage adopted a policy designed to Pages 4/5 address short-term issues while also preserving Michelin's long-term strategic vision. For the short term, we tightened management of our operations with the goal of maintaining the Group’s cash flow through strict inventory management and a revised investment strategy. As for the long term, we will pursue our strategy, which is based on three priorities: - Improving our competitiveness through a leaner cost structure. - Expanding in the new high-growth markets of China, India and Brazil, where planned investment levels will be maintained. - Leveraging our technological edge to address transportation industry challenges. Michelin is stepping up its research and innovation programs to support automotive manufacturers in their efforts to develop safer vehicles that are also quieter and more environmentally-friendly. Backed by its outstanding teams, MICHELIN is prepared to meet the crisis head-on and rise to future challenges. Michel Rollier, Managing Partner Key Group Figures The Group’s priority for 2009 is to preserve its major business and financial metrics And third, we’re carefully unsold production increases our leader. Our focus on expanding managing our cash position. debt by €30 million. our activities in new markets is unchanged and all our key How are you optimizing In the area of innovation and projects are proceeding management of product design, Michelin according to plan. manufacturing operations? claims to be one step ahead What does careful of the competition. Do you The process involves fine-tuning management of the cash believe this can be all our operations. The position mean? maintained even though Managing Partners consult with the Group Executive Council Group investment levels In today’s volatile markets, once a week in order to stay in were halved? this involves protecting Jean-Dominique Senard, touch with developments and Michelin’s cash and cash Managing Partner ensure maximum responsive- The Group’s long-term mission is equivalents. In other words, ness. Inventory control is key as to be a key contributor to better stabilizing cash flows by we must dispose of the right mobility around the world. This lengthening the average level of inventory to maintain has not changed. World markets maturity of debt. To this end, What measures are you € our overall economic balance. will continue to grow over the we placed an 750 million taking to attain these It also involves cutting back our long term, provided that our bond issue that was well objectives? manufacturing operations offering is tailored to new received by the financial We’re taking action substantially and introducing expectations in terms of community. simultaneously on three fronts: short-time working hours in a environmental protection and In short, we are making sure First, we’re continuing to number of countries. We customer needs. Michelin enjoys that under no circumstances optimize our management of support a range of initiatives many assets in these areas will Michelin be faced with a manufacturing operations in intended to limit the financial thanks to its ongoing capacity cash crunch. order to effectively control impact on employees concerned for research and innovation, inventory levels. Second, we’ve by these measures. which we will continue to considerably scaled back capital We are fully aware of the vigorously support. We will expenditure, which is capped at hardship caused to our leverage this advantage by €700 million for 2009 – 50% employees. However, we have pursuing our strategy, with the less than normal spending levels. no choice since each day of goal of remaining the industry Tire market trends Market change at end-June 2009 (%) • Passenger Car and Light Truck First-Half 2009 / First-Half 2008 Europe North South Africa Asia Total (including CIS) America America Middle East Original Equipment -33.1 -51.0 -17.3 -20.7 -25.0 -29.1 Replacement -12.1* -10.7 -4.6 -7.4 -5.2 -9.4 * Europe (excluding CIS) -6.5% • Truck (radial market) Europe North South Africa Asia Total (including CIS) America America Middle East Original Equipment -67.4 -47.8 -21.9 -30.7 -25.1 -44.5 Replacement -31.4 -18.2 -12.0 -22.3 -7.1 -17.2 02 • Horizons October 2009 Seen from within Michelin Competition at the Le Mans 24hours A Michelin technician recording track temperature 26 semi-trailers transporting 8,000 tires 2 tents on 800 m2: Competition: • one for storage, • one for fitting Michelin equips Part of Michelin’s 41 out of 55 The Michelin Competition team at Le Mans includes Genetic Code 30 technicians, 4 developers and For more than a century, Michelin has been involved in all 4 chemists forms of racing to demonstrate the superior strength of its Every partner team has a Michelin products and transfer the technologies developed on the tire technician at its disposal track to series-produced tires. Racing, therefore, is a genuine passion that Michelin teams share with their partners – racing teams and automotive manufacturers. Following their victory in the 1891 Paris-Brest- lights their day-to-day work,” said Claire Paris bicycle race with the first removable Dorland-Clauzel, head of Communication and tires, Edouard and André Michelin, the Brands, speaking at the Annual Shareholders Group's founders, realized that racing was the Meeting. “When the Peugeot Sports team best platform to highlight the superior perfor- visited our plant in Clermont-Ferrand,” mance of their products. Since then, Michelin she added, “Michelin employees were very has won thousands of titles and victories pleased and proud to take the drivers on a worldwide, always bearing in mind that tour of their workshop and display their racing would enhance the visibility of its know-how.” Michelin team at Le Mans brand and the value of its tires while suppor- ting its partners and meeting current techno- “During a race, tires play a key role that over logical challenges with tire solutions that the years has created a powerful relationship could be transferred or adapted to the tires among drivers, engineers and technicians,” the racing teams, deployed more than 100 used by the public. This, in particular, was the said Matthieu Bonardel, Four Wheel technicians and shipped some 8,000 tires.” case with radial technology. Competitions Manager. “With their years of Throughout the year, Michelin Competition “Over and above the technical aspects, racing racing success, Michelin and its partners have engineers, technicians and fitters work every is a strong vehicle for building brand image developed a kind of moral contract based on weekend, driven by the same passion and the among consumers as well as a powerful mutual trust.” For the latest running of the shared goal of helping Michelin to win. cement binding all of our teams, as it high- Le Mans 24hours, Michelin equipped 75% of @ www.michelinsport.com Horizons October 2009 • 03 Topical Review Over the last eighteen months, Optimal tire performance balance: our core competitive advantage With tires that deliver a unique combinasion of longevity, safety and fuel efficiency, Michelin is committed to enhanced mobility by lowering a tire’s environmental footprint and raising mileage performance while guaranteeing optimum safety. hile black on the outside, Michelin tires contain “With conventional tire technologies, it’s hard to a good deal of “gray matter” as they are in fact improve a parameter for a given tire without adversely very high-tech products. Over the past 15 years, affecting another parameter. For instance, grip can Michelin has striven to push the envelope further easily be enhanced but at the cost of reduced and enhance fuel efficiency while preserving and, longevity. On the other hand, using innovative in fact, improving tire safety performance technologies enables several parameters to be (wet braking in particular) and longevity. improved simultaneously. The introduction of silica w“This is all about achieving optimal performance in passenger car tires, for example, is a well-known balance,“ says Pierre Menendes, head of Michelin example of a technological breakthrough.” Technical Communication. “For Michelin, there is no question of improving tire Integrating silica and reducing weight fuel efficiency at the expense of service life, or worse, In the latest MICHELIN Energy Saver tire range, 99% of tire safety. Tires that lower fuel consumption but wear the carbon black in the tread is replaced by silica. Silica faster end up having a negative environmental impact both reduces tire heating and improves fuel efficiency and turn out to be more expensive for customers.“ (through lower fuel consumption) while preserving previous-generation tire longevity and in fact improving Technological Breakthroughs wet grip. “85% of product performance improvements result from innovative material compounds,” says Pierre Because of rolling resistance, tires account for up to Menendes. “The balance is accounted for by a 20% of a car's fuel consumption. The challenge Michelin combination of reduced weight (25% weight reduction has set for itself is to reduce tire-related fuel consumption since 1992) and an improved contact patch. But the through innovative technologies. “Innovative technology introduction of silica involved a lengthy process calling is indeed Michelin's watchword,” adds Pierre Menendes. for in-depth research and the development of 04 • Horizons October 2009 the 23 million 65.6 million liters of fuel and more than MICHELIN Energy Saver tires 131,000 tonnes of C02, or the equivalent of the sold in Europe have saved average annual consumption of 73,000 cars.
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