Michelin cuts cap-ex budget to shore up cash flow

ERJ staff report (TB)

Clermont-Ferrand, France - Group Michelin is cutting its capital expenditure budget in half and working diligently to control inventories as it pursues maintaining a positive free cash flow as its No. 1 financial goal this year, Michelin ceo Michel Rollier told shareholders recently.

Stating that Michelin sees “no clear signs of recovery” in most of its major markets, Mr. Rollier told shareholders at the firm's 15 May annual meeting that Michelin has reduced its capital spending budget this year to about $945 million (Euro 692 million) and reduced operations at many of its plants worldwide in order to keep inventories balanced with lower demand.

Referencing the firm's first quarter results-sales were down 14 percent-Mr. Rollier assured shareholders the firm has its “financial stability under control” and expects to see the benefits of lower raw materials costs in the second quarter results.

By adjusting production to balance demand, Michelin was able to avoid more than $800 million in inventory storage costs in the first quarter.

Mr. Rollier assured shareholders that the company continues to pursue its Horizon 2010 streamlining and growth objectives-having already achieved $675 million in savings-and hasn't lost sight of its long-term goals of reducing rubber consumption per tyre, achieving lower rolling resistance and noise and improving braking performance.

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Michelin cuts cap-ex budget to shore up cash flow from Tire Business (a Crain publication)