French tire manufacturer Michelin released its financial report on April 29. The company’s net sales in the first quarter of 2009 fell by 14.2% year-on-year to 3.512 billion euros (approximately US$4.61 billion).
The financial report shows that in addition to the Chinese market, unit sales of Michelin's ancillary services in all other markets have dropped by 24.4%. However, Michelin's replacement tire market remained strong, and Michelin’s revenue in this market rose by 11% in the first quarter of 2009.
Michelin Chief Financial Officer Jean-Dominique Senard said that it is still too early to predict the company’s 2009 performance, but there are already some signs that the company’s sales in 2009 will stabilize. Due to the implementation of the product elasticity strategy, Michelin did not encounter inventory pressure. In order to optimize the company’s working capital, Michelin decided to continue this strategy in the second quarter. In addition, due to the drop in raw material prices in the first quarter, the company’s capital expenditures have been significantly reduced, which will help Michelin control its capital expenditures in 2009 to less than 700 million euros.
Michelin plans to cut spending by improving labor productivity and cutting production in 2009 to improve its liquidity. Due to the declining demand in the North American market, Michelin has announced that it will close its Bulucher tire factory in Opelika, Alabama. Industry insiders believe that although Michelin plans to build and start production in countries with lower labor costs, 2009 was still a challenging year for Michelin.