2016 registration document CONTENTS INTERVIEW WITH JEAN-DOMINIQUE SENARD 2 1 MICHELIN AT A GLANCE RFA 5 5 INVESTOR RELATIONS 141 1.1 Ambitions for 2020 6 5.1 Information about the Company 142 1.2 Company Profile 16 5.2 Share information 143 1.3 Financial Highlights 17 5.3 Investor relations 145 1.4 Summary Organization Chart 21 5.4 Documents on display 146 1.5 History and Development of the Company 22 5.5 Share information 146 1.6 Facilities 23 1.7 Risk Factors 26 1.8 Governance 27 6 2016 EMPLOYEE, SOCIETAL AND ENVIRONMENTAL INFORMATION RFA 159 6.1 Employee information 160 2 REPORT OF THE MANAGING 6.2 Societal information 179 PARTNERS RFA 28 6.3 Environmental information 186 2.1 Tire markets 30 6.4 Report by one of the statutory auditors, appointed 2.2 Net sales 37 as an Independent Third Party, on the consolidated 2.3 Consolidated Income Statement Review 41 employee, societal and environmental information 2.4 Consolidated Balance Sheet review 49 included in the management report 203 2.5 Consolidated cash flow statement review 54 2.6 Return on capital employed (ROCE) 56 CONSOLIDATED FINANCIAL 2.7 Trend Information 57 7 2.8 Operating highlights 58 STATEMENTS RFA 205 2.9 Risk factors 61 7.1 Consolidated Financial Statements 2.10 Material contracts 71 as at December 31, 2016 206 2.11 Change of control 71 7.2 Statutory Auditors’ report 2.12 Information Concerning Supplier Payments 71 on the consolidated financial statements 274 2.13 Material changes in the Company’s business or financial position 71 2.14 Ownership structure and voting rights 72 8 COMPANY FINANCIAL STATEMENTS 275 2.15 Information disclosed in compliance 8.1 Review of the Financial Statements of Compagnie with France’s Grenelle 2 Act 72 Générale des Établissements Michelin RFA 276 8.2 Financial Statements of Compagnie Générale des Établissements Michelin (Parent Company) RFA 277 3 FINANCIAL HIGHLIGHTS 73 8.3 Statutory Auditors’ report on the financial statements 290 3.1 Markets 74 8.4 Statutory Auditors’ special report on regulated 3.2 Sales 76 agreements and commitments with third parties 291 3.3 Earnings 78 8.5 Statement of Changes in Equity 292 3.4 Reporting segments 80 8.6 Appropriation of 2016 Net Income 292 3.5 Cost structure 83 8.7 Five-Year Financial Summary 293 3.6 Cash flow and balance sheet 88 3.7 Consolidated key figures and ratios 92 9 ADDITIONAL INFORMATION 295 9.1 Person responsible for the Registration Document 4 CORPORATE GOVERNANCE 94 and the Annual Financial Report RFA 296 4.1 Administrative, Management and Supervisory Bodies, 9.2 Statutory Auditors 296 and Executive Management 96 9.3 2014 and 2015 Financial Statements 4.2 Practices of the Administrative, Management incorporated by reference RFA 297 and Supervisory Bodies 104 4.3 Management and Supervisory Board Compensation 109 4.4 Trading in Michelin shares by Managing Partners, 10 ANNUAL SHAREHOLDERS MEETING General Partners and Supervisory Board members OF MAY 19, 2017 299 and their close relatives in 2016 124 10.1 Report of the Chief Executive Officer 4.5 Report of the Chairman of the Supervisory Board and proposed resolutions 300 on the Membership of the Supervisory Board, 10.2 Report of the Supervisory Board 310 the Application of the Principle of Gender Equality, 10.3 Statutory Auditor’s reports 317 the Supervisory Board’s Practices and the Company’s Internal Control and Risk Management Procedures 125 4.6 Statutory Auditors’ report, prepared in accordance 11 TABLES OF CONCORDANCE 319 with Article L. 226-10-1 of the French 11.1 Table of Concordance with the French Commercial Code 320 Commercial Code on the report prepared 11.2 Cross-Reference Table for Employee, by the Chairman of the Supervisory Board 140 Societal and Environmental Information 321 11.3 Table of Concordance for the Registration Document 323 RFA This pictogram indicates chapters and sections that are also included in the Annual Financial Report REGISTRATION DOCUMENT 20 16 The original French version of this Registration Document was filed with the Autorité des marchés financiers (AMF) on March 7, 2017, in accordance with the provisions of Article 212-13 of the General Regulation of the AMF. It may be used in connection with an Information Memorandum approved by the Autorité des marchés financiers. It was prepared by the issuer and is the responsibility of the person whose signature appears therein. INTERVIEW WITH JEAN-DOMINIQUE SENARD INTERVIEW WITH JEAN-DOMINIQUE INTERVIEW Jean-Dominique Senard SENARD Chief executive officer "BEING THE LEADER IN SUSTAINABLE MOBILITY HAS BEEN OUR CORPORATE MISSION SINCE THE BEGINNING" HOW WOULD YOU DESCRIBE 2016? We delivered good results and met all our objectives. I’d like to thank all of our employees, whose commitment and professionalism made this performance possible. Our volumes increased by 2.1%, outpacing the market in all our product lines, including Truck, Earthmover and Agricultural tires, whose markets contracted over the year. Our growth was profitable at a time of declining market prices. Despite the negative currency effect, operating income rose by nearly 5% to €2.7 billion, or 12.9% of net sales. Net income came in at more than €1.66 billion, enabling us This performance was achieved on the strength of the MICHELIN to recommend that shareholders at the Annual Meeting on brand, supported by dynamic innovation in products and services, May 19, 2017 approve the payment of a dividend of €3.25 per which our customers highly appreciate, as well as the success share, compared with €2.85 for the previous year. This would of the intermediate lines deployed in every segment to beat represent a payout of 36.5% of our net income excluding back the competition. It attests to our ability to satisfy customer non-recurring items. demand more effectively, thanks to our more responsive sales and production processes. We completed our €750 million share buyback program over 2015 and 2016 and canceled 4.5% of outstanding Everyone’s commitment to lowering costs and improving our Michelin shares, in line with the commitments we made to day-to-day management delivered the expected €1.2 billion in our shareholders. We also carried out a new employee share gains from our 2012-2016 competitiveness plan, which helped issue, and now intend to offer the same opportunity every to generate a good level of cash flow. Free cash flow ended two years to give employees a stake in the performance that the year at more than €1 billion and net debt remained low, their engagement is helping to create. at 9% of equity compared with 11% a year earlier. YOU OFTEN TALK ABOUT MICHELIN’S TRANSFORMATION. WHAT ARE YOUR PRIORITIES? To maintain our leadership in sustainable mobility, we Our fourth driver is to empower people at every level, so that are activating four transformation drivers. everyone can feel engaged in driving the Group’s transformation. The first is to focus intensely on the customer, so that we We’re empowering front-line teams to organize themselves can meet each one’s needs faster and more precisely, and to and find the right solutions to meet a given objective in a make a difference not only with our products but also with framework defined by Management. In this way, managers the quality of our service and the entire customer experience. are resuming their role as advisors, who develop people’s capabilities and train their teams. This transformation is already The second driver is to digitalize our operations to nurture underway in several businesses with very positive results, in closer relationships and more enriching interactions with such areas as motivation and job fulfillment, performance our customers, facilitate sharing, cooperation and access and labor relations. It is thanks to this empowerment process to training for all our employees, to help our production that we’ve been able to sign the competitiveness agreements operators in every aspect of their work. that will secure the future of our French plants. Simplifying our operating procedures is the third transformation driver. In a more complex, more volatile world, we have to be very agile in making decisions and taking action. That means staying as simple as possible. 2 MICHELIN – 2016 REGISTRATION DOCUMENT INTERVIEW WITH JEAN-DOMINIQUE SENARD WHAT IS THE GROUP’S OUTLOOK FOR 2017 AND BEYOND? 2017 should be another year of growth, in line with We also want to double sales in Services and Solutions for our 2020 targets of more than €3 billion in operating business customers, developing an offering that allows them income from recurring activities and more than €1.4 billion to manage their vehicle fleets more effectively, and triple in structural free cash flow. sales in Mobility Experiences – those increasingly mobile and Markets are expected to track the trends observed in late digitally delivered activities like maps and itinerary planning 2016, with in particular a recovery in the mining tire market. services, restaurant guides and booking services, which were On the other hand, we will be faced with an increase in raw strengthened in 2016 with the purchase of European market materials costs, currently estimated at €900 million. To defend leader BookaTable. our margins, we have announced price increases of up to 8%. Lastly, we want to consolidate and capture the value of our In this environment, we expect to see volume growth in leadership in high-tech materials and their applications, line with global market trends and operating income from particularly additive metal 3D printing and the biomaterials recurring activities excluding the currency effect at least on that are paving the way to the post-oil era and supporting a par with 2016.