GREENVILLE, S.C. — Michelin has bolstered its business relationship with the U.S. military via three new tire contracts worth more than $2.4 billion.
The most lucrative agreement is a 10-year, $1.7 billion pact awarded by the military´s Defense Supply Center-Columbus, Ohio. The contract calls for Michelin Americas Truck Tires to provide ground tires for every type of wheeled vehicle for the four main U.S. military branches-Army, Navy, Air Force and Marines.
Michelin will manage -along with U.S. research and engineering firm Science Applications International Corp. -the wholesale supply, storage and distribution for those ground tires, the Greenville-based tire company said. The deal is the largest ever signed by the Defense Supply Center, according to the company.
The Jan. 25 disclosure of the pact came two weeks after Michelin made public a separate 10-year, $700 million deal with the Defense Supply Center to supply aircraft tires to the military.
The Tire Privatization Initiative contract-which like the ground tire agreement includes wholesale supply, storage and distribution of the tires-is the largest single tire pact ever awarded to the company´s Michelin Aircraft Tire Co. L.L.C. subsidiary. Michelin will partner with aerospace giant Lockheed Martin Corp. on the aircraft tire contract.
Both the aviation and ground tire contracts are residuals of the Base Realignment and Closure Act of 2005, which mandated commodity management privatization of tires, according to Luc Minguet, chief operating officer of Mich-elin Americas Truck Tires.
Most recently, on Jan. 30, Michelin also announced its BFGoodrich Tires business won a $10.7 million contract to supply the military´s Humvee fleet with BFGoodrich Baja T/A-brand tires developed specifically for military applications.
Expanding on a relationship
Michelin´s history of service to the U.S. military goes back to World War II, when it built tires for the Allies and supplied maps of France´s coastline for the D-Day invasion, Minguet said.
He said the French-owned manufacturer is proud to expand on its relationship with the U.S. military, and believes the contracts are in recognition of Michelin´s quality and technical leadership in designing and producing tires for use on military ve- hicles.
The company already is the majority supplier of U.S. Army tactical tires, and has invested $16 million in new and upgraded equipment over the past five years at its Spartanburg, S.C., and Waterville, Nova Scotia, plants to boost its tire production to meet military demand, particularly needs spurred by the war in Iraq, he said.
"Now we´ll add our expertise in logistics and supply chain management to streamline the timely supply of ground tires to U.S. troops at home and around the globe," Minguet said. "Michelin is ready to step up as the one-stop source for all military tire needs."
The ground tire contract will supply tires for vehicles from passenger cars and pick-ups to armored vehicles, in sizes from passenger car range up to 35/65R33 off-the-road tires, Minguet said.
The agreement will involve 3.87 million tires of different types and brands, he said.
Because passenger and light truck tires are included in the ground tire pact, those tires could be produced at U.S. plants specializing in those types as well, Minguet said.
The tire maker said it will provide 100 percent of the military´s ground tire needs through its own and competitive tire sourcing, allowing the U.S. Department of Defense to take advantage of the most recent technologies, expertise and business practices of private industry.
This will provide a more responsive program for the military´s forces-domestic or overseas-and improve efficiency. The ground and aviation tire contracts are expected to save taxpayers about $172 million over the life of the contract, Minguet said. Each military branch previously managed its tire supply separately.
Delivery standards for the ground tire contract will be on a sliding scale, depending on priorities on tire types and geographic locations, Minguet said. The highest priority needs will be guaranteed within two days while the maximum acceptable delivery time for non-critical applications is 10 days.
On the aircraft tire side, Michelin already has an agreement in place with the U.S. Navy-though it will be centralized in 2009-and the new contract extends its logistics expertise to the Army and Air Force as well.
The current Navy pact stipulates that Michelin must deliver aircraft tires anywhere in the continental U.S. in 48 hours or less and anywhere in the world in 96 hours or less. The company said it is exceeding those requirements, averaging more than 98-percent on-time delivery, with zero back orders.
As in the ground tire contract, the firm will meet demand by providing its own Michelin-brand tires as well as sourcing competitors´ tires as well.
For the Humvee agreement, BFGoodrich will produce and supply thousands of replacement Baja T/A tires out of its Fort Wayne, Ind., facility, beginning in May, the company said.
Jake Jordal, BFG director of military products, said the Humvee contract is "great news" for the Michelin unit and the Fort Wayne plant.
"We already supply tires for most large vehicles, and supplying tires for the Humvee makes good sense," Jordal said.
The Baja T/A was chosen to outfit the Humvee because of its improvements over the previous fitment in several categories, including weight-carrying capacity, ability to perform evasive maneuvers, projected tread life, wet and dry pavement maneuverability, and mud traction, the company said.