Michelin to Close Budapest Truck-Tire Plant to Cut Costs

Michelin & Cie., Europe’s largest tiremaker, plans to close a factory in Budapest because of growing competition and slumping demand for truck tires.

Production at the factory in the Hungarian capital will cease by mid-2015, the Clermont-Ferrand, France-based company said today in a statement. The shutdown will affect 512 employees and lead to a charge of 39 million euros ($54 million) in Michelin’s first-half earnings.

“The decision reflects the fact that extending the facility is no longer possible, due to its location in an urban setting, and that improving its competitiveness would require excessive upgrading,” the company said.

The manufacturer is cutting jobs as European automakers struggle to recover from a six-year contraction stemming from the effects of the sovereign-debt crisis. Demand for truck tires in Europe has dropped 23 percent from a 2007 peak, Michelin said today. The tiremaker has a target of reducing costs by 1 billion euros by 2016.

The Budapest site makes tires sold under the Taurus, Riken and Kormoran brands. Its production will be reallocated to Michelin factories in Poland, Romania and Germany.

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