BUDAPEST—Michelin plans to close a truck tire plant in Budapest by mid-2015, citing a “volatile” European truck tire market and the factory's urban location.
Michelin said it would reallocate the Budapest plant's output of Taurus-, Riken- and Kormoran-brand tires to other company factories in Olsztyn, Poland; Zalau, Romania; and Karlsruhe and Homburg, Germany. The company said it intends to offer “individual support measures” to the 512 affected employees.
Michelin has operated the Budapest plant and a second tire factory in Nyiregyhaza, Hungary, since 1996 through its acquisition that year of the former Taurus Rubber Co.
It also has non-tire assembly plants in Vac and Tuzser, Hungary. None of the other plants will be affected by the Budapest plant decision, Michelin said, including the Nyiregyhaza factory that makes agricultural and high-performance car tires.
The decision to close the plant reflects the fact expanding it is no longer possible, Michelin said, due to its location in an urban setting and that improving its competitiveness would require excessive upgrading with new equipment.
Michelin also cited the fact that demand for truck tires in Europe is down 23 percent from its historic high in 2007.
The tire maker said it will meet with local authorities to discuss possibilities of reconverting the site in accordance with their urban development projects and intends to help develop business activities likely to create jobs in the region.
Michelin will continue operations at its logistics center in Vac, which serves countries in Central and Southern Europe, and its strategic raw materials marketing unit in Tuzser.
In addition, Michelin will continue to manage its entry-level car tire operations from Budapest, while maintaining all of its Hungarian sales operations.
To finance the project, Michelin will book a $54 million provision for non-recurring expenses in its first-half 2014 accounts.