GREENVILLE, S.C.—The Michelin brand is one of the most recognizable in the world, but the tire maker knows it can't relax. At least not if it wants to continue as one of the most innovative in its field.
Pete Selleck's job is to ensure the North American arm of the tire giant does its part.
The president and chairman of Michelin North America Inc. has been busy in 2014, with two major investments in South Carolina to expand the firm's earthmover agricultural tire capacity; in Lexington, S.C., to expand its performance passenger tire car capacity; in Waterville, Nova Scotia, to produce more of its X-1 tire; and in Louisville, Ky., to convert the plant to make higher technology grades of synthetic rubber.
And recently, Michelin said it is investing $50 million to establish a manufacturing facility in South Carolina to produce its Tweel line of airless tires.
Selleck said Michelin is investing about $2.6 billion in total expansions worldwide for 2014, with North America seeing a hefty share, probably because the region represents about one-third of Michelin's total sales, reporting $10.3 billion in 2013.
“We are very respectful of our competitors,” Selleck said. “Everybody in the tire industry today has strengths, and everybody is improving. We are very respectful of that. We're in no means resting on our laurels. We know we have to continue to improve in all areas simultaneously. I don't think there is one particular area where we're horribly deficient. We're focused on improving everywhere.”
Michelin said in 2012 the total investment of its new 800,000-sq.-ft. earthmover facility in Starr, S.C., combined with an expansion at its existing earthmover facility in Lexington, totaled about $750 million.
Selleck said about 80 percent of the earthmover tires produced in South Carolina will be exported to other regions of the world, making North America Michelin's flagship for the product. The firm operates one other earthmover tire plant, in Spain.
The manufacturing facility represents the firm's 19th in North America and 15th in the U.S. The firm operates three in Canada and one in Mexico, with about 22,000 of the group's 112,000 employees in the region. Michelin has 14 distribution centers, sales headquarters in each country, and a research and development center and a test track about an hour from its Greenville headquarters.
The firm also launched three products in the North America region, highlighted by the Premiere All-Season passenger car tire in April, debuting at the North American International Auto Show in Detroit.
Its BF Goodrich brand re-launched the BF Goodrich All-Terrain TA tire on Oct. 1, with tread that extends almost halfway down the sidewall. And in Mexico, Michelin's Uniroyal brand launched a radial truck tire, which Selleck said will debut in the U.S. this spring.
Selleck said the Premiere All-Season passenger tire addresses the issue of wet braking performance as it wears using its EverGrip technology. Popular Science magazine recently selected the tire as one of the Top 100 innovations of 2014 in the automotive category of its annual Best of What's New list.
Through new rubber compounding, new shapes in the ring grooves and placing some shoulder grooves, Michelin has been able to minimize the impact of that erosion. Selleck said the tire stops better when it's worn than some of its competitors do brand new.
“We are known as the most innovative company in our industry,” Selleck said. “We're the ones that have basically made all the major inventions in the last 70 to 80 years, and we're still doing that.”
Representing the industry
Selleck also represents the tire industry on regulatory issues through the Rubber Manufacturers Association, currently in the middle of a two-year term as its chairman.
“The RMA is a very effective trade association. There is an excellent team in Washington that does really, really good work,” Selleck said.
“I have been very pleased with many of the improvements that have taken place with the board over the last four or five years. It's very clear that the RMA is becoming much more effective because tire makers do see where there are areas of common interest, where it's important that we unite as an industry—primarily, to focus on the areas of environmental performance and safety, because our product has a huge impact in both of those areas.”
One issue the RMA is united on is that of thresholds for fuel economy and rolling resistance, Selleck said. The RMA has agreed on a fuel economy and rolling resistance threshold for the industry, much the same way as Europe employs grade thresholds to prevent sub-quality tires from being sold. If a tire doesn't meet a certain grade, it cannot be sold in the European market.
He said the U.S. and Canada are two of the few developed countries that do not have grading thresholds for wet braking or fuel economy.
“International companies that don't have good technology can only sell their product in the developed world today in North America,” Selleck said. “We have been talking with the RMA and to government officials saying that's unusual. The concept of thresholds for wet braking and fuel economy are things we need to have in order to improve the safety and environmental performance of our products.”
The U.S. does, however, have a grading system for fuel efficiency dating back to 2007, when Congress directed the National Highway Traffic Safety Administration to establish one. But that system does not require a tire meet a certain grade to be sold on the market.
“It's unusual, the industry actually saying "we agree there should be a threshold as we see it in other parts of the world,' “ Selleck said. “We know that there is a resistance to regulation in our country, but when it comes to fuel economy and when it comes to wet braking, we think that those issues of environment and safety are important enough that consumers should be protected from products that are not environmentally responsible or safe.”
The RMA recently praised NHTSA's decision on tire aging when it said it will not seek to create a safety standard based on tire age.
Michelin issues technical guidance to customers on the issue of tire aging. Selleck said the firm encourages customers and dealers to have tires inspected by a certified tire technician when it reaches five years old and continue to be inspected every year afterward until it reaches 10 years old. At that time, Selleck said the tire normally will be taken out of service.
“That is our policy, our guidance to our customers,” Selleck said. “Not all manufacturers agree with that, but that's the policy that we have.”
Selleck said the industry does not have a consensus on tire aging.
“If the rules were changed, and some strict regulations were put in, I don't think that would have a big impact on us,” Selleck said. “There would certainly be a higher sensitivity to the age of tires actually delivered to customers and then to consumers. But today tires move very quickly. There are not a lot of tires in the system.”
New markets, technology
Selleck said the industry believes that 80 percent of the growth in the next 20 years will occur in emerging markets, though some of those markets—namely Russia and Brazil—have been slowing down recently.
But that hasn't stopped the firm from investing in Latin America. Michelin recently offered to buy a Brazilian fleet management company—Sascar Tecnologia Automotiva S.A.—for $720 million, including the assumption of $110 million in debt.
Sascar produces a fleet monitoring service managed 24/7 via computer, tablet or smartphone. Sascar said it offers monitoring via satellite, cellular communications or a hybrid of both.
Selleck said the Brazilian firm puts Michelin in a proactive position to anticipate how the Internet will affect the tire manufacturing industry. He said Sascar services about 30,000 fleets, managing about 190,000 trucks.
“We acquired them because we think what they do is very interesting,” he said. “We think we can learn from that experience and that they can help energize our digital strategy in the company.”
The executive said Michelin continues to expand worldwide, with two plants in China, a truck tire plant in India, a synthetic rubber plant in Indonesia and a passenger car tire plant in Brazil.
“We're putting in a lot of capacity in those parts of the world because that's where the market's going to be in the future,” Selleck said.
“In most of those plants all over the world, the production employees that work for us don't own cars today. However, we're seeing the transition already start to where they're getting to the point where they can own cars.”