Financial overview

(*)Before non-recurring items.

Remarks
(1) Net sales totaled EUR 16,384 million, up 5.1%. The changes resulted from the following factors:
- Plus 4.7%: continued strong positive price-mix effect, further accentuated towards the year end (+ 6.1% in the 4th quarter). This reflects price increases passed across product offerings and regions to compensate for very substantial raw material cost increases. It also results from the constant enrichment of the Group's product offering, notably on the High-performance and Winter segments.
- Plus 0.7%: slightly positive volume effect due to December volume sales sharply down versus 2005. The Group was impacted by a substantial decline in the North American passenger car and light truck markets.
- Negative (- 0.2%) scope effect mainly relating to disposal in May 2005 of Michelin's Wheel operations.
- Neutral impact of exchange rates.

(2) Operating income declined 2.2% to EUR 1,338 million. The unprecedented rise in external costs translated into an additional EUR 824 million cost burden for the Group compared to 2005, with raw materials alone accounting for EUR 740 million. This additional burden could not be fully offset by the price increases passed across product ranges worldwide.

(3) Group sales were up 4.3% in value. They declined sharply in North America in a context of economic slowdown and very high fuel prices until September 2006. Original equipment markets were down in both regions, especially in North America. Elsewhere, most markets were up worldwide with very strong growth in China where Michelin strengthened its positions. In replacement, the significant increase in raw material costs was partly offset by selling price increases.

(4) Group sales were up 6.8% in value. Throughout the world, except in South America, original equipment truck tire markets were very dynamic. The Truck Replacement markets, on the other hand, behaved differently from region to region.

Contracts
-In January 2007, the Company renewed a long-term world-wide contract with the Volvo Group to supply OE truck tires for Volvo vehicles assembled in Europe, and North and South America.
The main ranges of tires for trucks and long haul trucks built by Volvo will be equipped with the tires with Michelin Durable Technologies.

Divestitures and restructuring
- On January 18, 2007, Michelin announced its decision to end tire production at its Nigeria-based Port-Harcourt factory. Sales operations and those in connection with the Nigerian plantations will be retained.

MEF (Michelin Environment Footprint) Composition and Progress Objectives

R&D Expenditure

(in millions of Euros)	2006	2005	2004	2003	2002
Research and development cost	591	565	576	710	704
% of sales	3.6%	3.6%	3.8%	4.6%	4.5%

R&D Structure
4,000 research engineers and developers are engaged in the R&D operations in Europe, North America and Asia.

New Product Development
In 2006
Michelin introduced a series of new tires on the highly demanding truck market. These include the Michelin XDN2 Grip winter tire for long haul trucks, that benefits from the "Michelin Durable Technologies" cluster of innovations. It delivers 25% more longevity and 30% more grip than previous generation tires.

Capital Expenditure

- In Canada, the Group is raising its steel cord production capacity and will double Michelin X One Truck tire capacity in North America by adding it to the production of its Waterville plant by 2007.

- In the United States, Michelin has doubled capacity at the Covington tread pressing facility.
It is investing to achieve a 20% productivity gain at the Greenville plant which is dedicated to Passenger Car and Light Truck tires.

- In the United States, Michelin North America announced in January 2006, to invest $92 million to install production for its "X One" wide single truck tires at its Waterville, Nova Scotia plant. The expansion will double the X One tire capacity. Its plans for expansion include new equipment and additional technical and manufacturing employees related to the production of X One tires, making Waterville the second largest truck tire manufacturing plant in the Company's global network.

- The Group is investing EUR 400 million over 4 years in France, Spain and Germany to produce more than 4 million truck tires architectured around the "Michelin Durable Technologies" and a further EUR 100 million in Poland's Olsztyn site where an EUR 250 million investment program is already under way.

- In China, the Company has been ramping up Michelin Passenger Car and Truck and Bus tire production by 41%. It will continue the ramp up in 2007.

Boosting Expansion in Emerging Countries
-It strengthens its development resources to tailor its product offering to local market expectations. Accordingly, it has set up research facilities in Bangkok and Ohta, Japan.
-Over the 2005-2010 period, industrial capacity investments in emerging countries will be approximately EUR 3 billion or EUR 500 million per year.
-By 2010, new plants and expansions scheduled in Brazil, China, Poland and Thailand will increase Group annual capacity by around 7 million Passenger car and Light truck tires, 1 million Truck and Bus tires and 40,000 metric tons of Earthmover tires.