Michelin Business Report FY2007

Business Highlights

Financial overview

(in million Euro) FY2007 FY2006 Rate of change Factor
Sales 16,867 16,384


Operating income(*) 1,645 1,338


Business unit of Passenger Car-Light Truck & related distribution
Sales 9,041 8,991


See remarks (1) below
Operating income(*) 830 736


Business unit of Truck & related distribution
Sales 5,639 5,418


See remarks (2) below
Operating income(*) 427 357


(*) Before non-recurring items.

(1) The price effect was favorable as a result of the full impact in 2007 of the price increases that the Company implemented throughout 2006. Net sales, however, only increased 0.6%, as a result of negative exchange rate impact. Excluding the currency effect, its sales growth would have been 4.5%.In the original equipment market, the Company gained market share.

(2) Net sales were up 4.1% (7% excluding currency impact). Operating income was up to 19.6% and operating margin was up 1 point to 7.6%. These results were due to strong sales volume growth in most regions, except for North America, and to significant unit price increases as multiple price increases were implemented in 2006 and in the first half of 2007 in nearly all countries.

-In July 2007, the Company announced that the new BMW M3 would be equipped with Michelin Pilot Sport tires, following BMW M GmbH's decision to shoe the sportiest member of the 3 Series family with Michelin's sportiest tire.
-In December 2007, the Company announced that the 2009 Corvette ZR1 would be equipped with Michelin tires as the Company prepares to grip the pavement with its first-ever Corvette original equipment fitment for this new model.
-In December 2007, Nihon Michelin Tire announced that its Energy MXV8 passenger car tires would be mounted on the newly launched Honda Inspire as original equipment parts.
-In 2007, the Company renewed its long-term global contract with Volvo. This covers original truck tire supplies for Europe , North America and South America for the Volvo truck, Volvo Bus, Renault Truck and Mack Truck brands.

-In October 2007, Michelin North America announced the completion of its acquisition of Oliver Rubber Company from Cooper Tire & Rubber Company. Oliver, which produces tread rubber and retreading equipment, will now operate as a subsidiary of Michelin North America, Inc. This acquisition complements Michelin's tread manufacturing capacity and extends, via the Oliver dealer network, the commercial reach of Michelin's services throughout North America's growing retreading market.

-In October 2007, the Company announced its plan to stop production in the Toul plant (France) in 2009. This project is in line with its industrial strategy in France and Spain. The Company released its project in Spain to improve competitiveness in all Spanish plants and to specialize production at the Lasarte site.


R&D Expenditure
(in million Euro) 2007 2006 2005
Total 571 591 565
% of sales 3.4% 3.6% 3.6%

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

Investment Activities

Domestic & Overseas Investments
(1) Western Europe
<Competitiveness improvement plan Spain (2008-2011)>
-The Lasarte plant will specialize to become a motorcycle tire facility. End of passenger car tire production.
-Increase in the Vitoria plant's passenger car and earthmover tire production.
-Specialization of the Aranda plant on Michelin Durable Technologies tire ranges.
-Increase of the Valladolid plant's passenger car and agricultural tire production and truck tire retreading facilities.

-Specialization of the Cholet (Light truck tires) and Bourges (Aircraft radial tires)
-The Toul passenger car tire plant is due to close in 2009.

(2) North America
<USA + Canada>
-Michelin X One truck tire production capacity doubled.
-2005-2008: 50% increase in the Lexington plant's earthmover tire production capacity.
-New tread manufacturing facility inaugurated in 2007.
-Project to build a second passenger car and light truck tire plant.

(3) South America
-Projects to increase truck tire production capacity by 30%
-Commissioning of Brazil's Campo Grande earthmover plant (capacity: 40,000 metric tons/year).

(4) Asia
-Projects to double passenger car and light truck and truck tire production capacity.
-Specialization of the Ota plant to better meet the specific requirements by the Japanese market.

(5) Africa
-Port-Harricourt (Nigeria) production activities ended in 2007.