Michelin to close two French plants in latest blow to Europe’s auto sector

Tire maker Michelin plans to close two of its French factories, affecting about 1,250 workers, it said on Tuesday as Europe’s embattled automotive sector comes under increasing pressure.

The French company, founded 135 years ago, cited high costs and cheap Asian competition for the closure of its Cholet and Vannes sites in western France.

Michelin’s announcement comes just weeks after unions at Europe’s largest car manufacturer Volkswagen warned of planned plant closures and peers including Peugeot-maker Stellantis issued hefty profit warnings.

Also on Tuesday, Germany’s Schaeffler, another major automotive supplier, said it would lay off 4,700 people.

Michelin’s move outraged French labour unions. The hard line CGT called on all Michelin workers to go on strike, while its more moderate peer CFDT urged management and the government to revisit the closures and seek alternatives.

“We assessed our options but couldn’t find any alternatives to (closing) these two sites” Michelin Chairman Florent Menegaux told newspaper Le Monde, adding: “The only constant at Michelin is that it’s always on the move.”

Speaking in the National Assembly, Prime Minister Michel Barnier said he regretted Michelin’s decision and said affected workers must be helped with all available means.

“The automotive sector is in a difficult spot and not only in our country,”, Barnier said, adding that Europe must protect its auto industry against “unfair” foreign competition with stronger action and less “naiveté”.

Industry Minister Marc Ferracci called for a European “emergency plan” to save the sector, saying he would work towards formulating policy proposals at the EU level in the coming weeks.

Labour unions had already alerted workers to the possible closure of the sites in Cholet, which mainly manufactures smaller light truck tires and Vannes, which makes metal tire frames and has 299 employees.

Staff at Michelin’s Cholet site, which employs 955 people, later on Tuesday voted in favour of strikes to protest the planned closure, a union source told Reuters.

Michelin said the market share of entry-level car, light truck and heavy duty tires had increased significantly over the last decade, hitting premium categories, and leading to over capacity at some Michelin plants.

The two sites to be closed have been “severely impacted by the structural transformation of the passenger car and light truck and truck tire markets and worsening competitiveness of Europe, notably due to inflation and rising energy prices”, it added.

It has already halted production at both plants through Nov. 11 to give management and the unions time for group and individual discussions with employees, it said, recording a provision of approximately €330-million ($360-million) in nonrecurring expenses in its consolidated financial statements as of Dec. 31.

Michelin announced last year the closure of two German heavy-duty truck tire sites and last month lowered its annual profit forecast due to a more marked slowdown than expected in the auto market in the third quarter.

It employs nearly 15,000 people in France at 15 manufacturing plants.