June 10 (Bloomberg) -- Michelin & Cie., Europe’s largest tiremaker, will end production of heavy-truck tires at a factory in France, eliminating 730 jobs at the site and trimming excess capacity amid slumping demand in the region.
A factory in Joue-les-Tours, about 250 kilometers (155 miles) southwest of Paris, will stop making the tires by the first half of 2015, the Clermont-Ferrand, France-based company said in a statement today. About 200 of the plant’s 930 employees will keep their jobs. Michelin is also selling its heavy-truck tire activities in Algeria.
Michelin’s European plants are currently using 50 percent to 60 percent of capacity for truck tires and 70 percent for passenger cars and light trucks, Michelin Chief Executive Officer Jean-Dominique Senard said on May 17. The company is seeking growth outside Europe and expanding offerings of tires for large vehicles such as mining equipment.
“Our factories can’t run at 50 percent of their capacity,” Senard said today on the RTL radio station in France. “When they’re small, they’re not competitive. We’ve waited for a very long time to check whether the trend is structural. The answer is: this is structural.”
The French tiremaker’s sales fell 8.1 percent in the first quarter to 4.88 billion euros ($6.45 billion), as the region's car market slides for a sixth straight year. Deliveries in western Europe dropped 6.8 percent from January to May, according to IHS Automotive. Demand for trucks over 3.5 tons in the European Union tumbled 14 percent in the first four months of 2013, according to industry association ACEA.
“The move was to be expected,” said Gaetan Toulemonde, a Paris-based analyst at Deutsche Bank. “They had already said that if the market didn’t pick up, they’d have to take some decisions before the end of first half.”
Michelin shares fell as much as 60 cents, or 0.9 percent, to 67.80 euros and were down 12 cents at 2:18 p.m. in Paris trading. The stock has slipped 4.6 percent this year, valuing the company at 12.5 billion euros.
Demand for heavy-truck tires has fallen 25 percent since 2007, according to Michelin. The 200 remaining employees at the Joue-les-Tours site will work on semi-finished products.
To improve its competitiveness in France, Michelin plans to spend 800 million euros by 2019 in its home country, the company said. The manufacturer employed about 24,000 people in France at the end of 2012, or 22 percent of its global headcount. The investment includes money to develop a research center in Clermont-Ferrand and double heavy-truck tire production at a factory in La Roche sur Yon.
The French manufacturer agreed to sell its Algerian truck-tire activities to Cevital SpA for an undisclosed sum, the company said today. All 600 employees at the factory will be offered jobs by Cevital.
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