News from Notch Consulting, Inc.

December 24, 2008

Tire Industry Feels the Pain of Auto Woes

Filed under: General, Tires — Notch @ 11:12 am

Miles Moore of Tire Business published an article (subscription required) yesterday, “As Faltering Auto Industry Bleeds, Tire Makers Suffer,” which discusses conditions in the automotive industry, including the bailout, and their effect on tiremakers.

Though some companies are more specific than others in what they reveal, various companies in the tire and auto parts industries agree that certain austerity measures—including production curtailments and employee layoffs—have proved expedient in what some commentators call the worst economic crisis since the Great Depression.

Another recent article in a similar vein appeared in Automotive News on December 22, “Many Suppliers Won’t Survive Production Cuts.” (subscription required). It included the following eye-popping statistics on domestic vehicle production:

Domestic and import brand auto makers in North America are expected to produce 2.1 million vehicles in the first quarter, according to projections by CSM Worldwide and company forecasts. That would be a stunning 39.2 percent drop from the same period in 2008.

Suppliers to the Detroit 3 will be in the toughest shape. Detroit 3 production is expected to total 1.1 million units, a precipitous 47.2 percent decline from the same period a year earlier.

The effects are plain to see, from Michelin’s production cutbacks, to Nokian cutting its sales forecasts and laying off the employees of Nokian Heavy Tyres for six months, to Bridgestone slashing its profit forecast.

Michelin Cuts Global Production

Filed under: General, Tires — Notch @ 10:47 am

Michelin issued a terse press release on Monday, December 22, 2008 indicating that it has “significantly cut back on operations in most plants worldwide.” The cuts are in response to sharp declines in tire demand in November in all European, North American, Asian and South American markets. According to the release, the current economic environment has led to exceptional costs due to under-utilization of capacity, which will amount to nearly €150 million in the company’s fourth-quarter accounts. With the production cut-backs, Michelin says it is taking the necessary steps to effectively manage inventories and maintain its flexibility moving into 2009.

Here is the press release.

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