News from Notch Consulting, Inc.

March 22, 2008

Michelin to Index OE Tire Pricing to Oil Prices

Filed under: Tires — Notch @ 11:03 am

Michelin plans to introduce a new pricing system for passenger and light truck tires sold into OE markets that will include an adjuster for oil prices. The change will take effect on April 1, 2008. According to Michelin, petroleum-based products account for nearly 60% of the cost of a passenger tire.

The press release is reprinted below. Here is a link.

Michelin Group Announces Price Increase and New Pricing System for Automaker Customers
(Paris – March 21, 2008) – In response to soaring oil prices, Michelin has introduced a new tire pricing system for customers in the automobile industry that will clearly distinguish the effects of petroleum-based raw materials from the intrinsic value of Michelin tires.

With petroleum-based products accounting for approximately 60 percent of the cost of a passenger car or light truck tire, the recent dramatic increase in oil prices has had an impact on the cost of Michelin tire.

As a result, Michelin will adjust its prices based on a scale indexed to changes in oil prices. The system is a pledge of transparency and clarity in Michelin’s relations with automakers.

Scheduled to take effect as of April 1, 2008, the new price schedule will be applied to all passenger car and light truck tires sold to automobile manufacturers worldwide.

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