Michelin growth strategy looks at tires and beyond

GREENVILLE, S.C.—Tires are at the heart of everything Michelin does.

As the world's No. 1 tire maker continues to grow its global footprint, developing products and solutions that help to create more equitable mobility, its growth plan puts tires right at the center.

And while Michelin may not have secured the No. 1 spot on the Rubber News ranking of North American rubber products makers, the Greenville-based company continues to make gains on the continent.

And that's not by coincidence.

"Michelin North America is one of the most important regions in the world for Michelin Group," Alexis Garcin, chairman and president of Greenville-based Michelin North America Inc., told Rubber News.

How important?

Well, last year, North America's overall sales of $9.91 billion represented an 18-percent year-over-year increase for the tire maker and trailed only Europe ($10.65 billion), Michelin's largest region. North American sales also outpaced all other regions (excluding Europe), which accounted for a combined $7.55 billion in sales.

And this growth took root even as the pandemic's lingering effects continued to weigh on North American tire demand, particularly on the original equipment side. Demand for OE tires surged at the start of 2021, but the routine manufacturing stoppages inflicted by the semiconductor shortages softened that demand in the latter half of the year, Michelin said in its annual report, released in February.

Replacement tires also surged at the start of 2021 and slowed a bit by year end, Michelin said, noting that the overall demand grew for the year.

The company's conveyor belting business—represented by Fenner P.L.C., which Michelin acquired in 2018—held firm in North America as mining and industry across the continent rebounded ahead of other global regions.

This is all good news for Michelin North America, which has its sights set on exponential growth. A growth it plans to cultivate in three key business areas.

"Everyone knows Michelin as a tire company, and while we are the leading tire manufacturer, we are so much more," Garcin said. "Our company is in a defining moment in our history, and we have an exciting road map to expand our activities and seize growth with tires, around tires and beyond tires."

The heart of Michelin North America is—and always will be—tires. So it makes sense that the company's growth strategy would start there.

"The 'with tires' strategy is (about) continuing to make significant investments in our core tire business to promote mobility while protecting the environment," Garcin said, noting the tire maker's continually expanding North American product portfolio as proof of this effort.

Some of the latest product offerings include the Michelin X One Line Energy D2 heavy truck tire, which debuted May 1. Available in North America in size 445/50R22.5 L, it has a 20/32 tread depth and is designed to increase fuel savings through increased rolling resistance.

The Michelin X InCity Grip D premium drive tire, launched early this year, is designed especially for bus fleets operating in harsh winter weather conditions in Canada and the U.S. Upper Midwest.

Meanwhile, Michelin-owned BFGoodrich launched two notable tires in 2021, The BFGoodrich Advantage Control all-season tire in the spring and the BFGoodrich Trail-Terrain T/A in the fall. The former—fitted for cars, crossovers and minivans—offered improved all-weather performance with compound improvements, while the Trail-Terrain used a chip-and-tear-resistant compound for improved performance.

Perhaps the most significant tire offerings Michelin has introduced of late are those that meet auto industry buzz in the electric vehicle space. These include the Michelin e.Primacy and Michelin Pilot Sport EV for passenger vehicles, and the Michelin X InCity Energy Z for electric bus fleets.

Those EV tire offerings—as well as any others on the horizon—will prove significant as Michelin looks to maintain and grow its stake in the North American market.

"Electrification is driving the largest revolution in the automotive industry since its inception, and Michelin is uniquely prepared to lead," Garcin said. "Michelin's history of innovation keeps us at the forefront of the electric vehicle revolution.

"We invented the first energy-efficient tire in 1992, optimizing rolling resistance and helping vehicles reduce CO2 emissions through improved fuel efficiency. This translates today in our ability to provide OEMs with tires that extend the range of their electric vehicles. It's an incredible opportunity and a strong testament to the ability of Michelin to be at the forefront of the innovation."

A recent study by Boston Consulting Group estimates that 59 percent of vehicles sold worldwide by 2035 will have electric powertrains.

Europe—Michelin's largest market by region—is expected to lead global EV sales by 2035 with an estimated 93 percent of all new vehicles sold there having electric powertrains. But the U.S. also is poised to see significant growth in the EV market, with BCG expecting the electric vehicles to account for 68 percent of new-vehicle sales by 2035.

And Michelin tires, Garcin said, can make those vehicles more efficient.

"Tires have become even more important in the electrification space—we can add to range," Garcin said. "Our Michelin e.Primacy tire is the rolling resistance leader with a 27-percent reduction compared to the category average. That means a 7-percent longer range for an EV."

Michelin's commitment to growing the North American market also is embodied in its continued investments in production and capacity expansion, Garcin said.

"We continuously evaluate growth opportunities, as we see the North American market as an opportunity," he said. "As an example, we have announced in 2020 a $75 million investment in our Spartanburg, S.C., and Waterville, Nova Scotia, commercial truck facilities. We are also excited for the expansion of the track assembly plant in Shawinigan, (Quebec,) this year, which will enable us to increase our manufacturing operations there to ensure we're able to meet our customers' needs now and in the future."

If the heart of Michelin is its tires, its soul is built around them, too. As such, Michelin has built the second part of its growth strategy on the technologies and ideas that make the tires more sustainable and efficient.

"The 'around tires' strategy is about transforming transportation through data connectivity with new services that make our customers' lives easier while reducing their impact on the planet," Garcin said. "Michelin is always looking to develop programs that will benefit our customers."

In North America, Garcin said, the around tires strategy is embodied by programs such as Maestro Marketplace, a digital, web-based platform Michelin introduced in 2020. Maestro is intended to help fleets—particularly those that are small- or mid-size—better manage maintenance schedules to maximize time on the road.

"This is a nationwide program designed and developed to allow our fleet owner partners to access reliable maintenance and data from a dedicated network of vendors around the country, allowing them to both decrease maintenance time and increase their road time," Garcin said.

With the introduction of Maestro, Michelin cited reduction in billing errors and improved service turnaround time as advantages of the program, which offers scheduling and real-time communication features for vehicle service and transportation planning.

The program, Garcin noted, is in the early stages, but has proven valuable to those who use it.

"The results from the initial participants have been very encouraging," he said, "and they are incredibly pleased with what they have seen to date."

The heart of Michelin may be its tires, but mobility—and the drive to move continually forward—is its passion.

"Michelin (is) in motion for our customers, our employees and the world around us," Garcin said. "We are at a defining moment for our company, and we had to find a better way to combine economic growth and greater mobility with strong environmental protections—balancing people, profit and planet. Motion is life—not profit or environment; it's profit and planet.

"We believe we must find a way to make mobility sustainable for our customers and the world around us."

The Clermont-Ferrand-based parent company has, in recent years, established four key partnerships that will help to shape the sustainability of its tires in the years ahead. And those partnerships, ultimately, will help guide Michelin in the development of a 100-percent sustainable tire by 2050.

The group's sustainability journey has some roots in a 2012 partnership dubbed Biobutterfly. The project—a 10-year effort focused on the development of bio-sourced butadiene from ethanol—has been significant for Michelin's sustainability journey. With its partners—IFP Energies Nouvelles and Axens—and with backing from ADEME (French Agency for the Environment and Energy Management), the project took shape in 2020 with the start of construction on an "industrial prototype" plant for the production of bio-based butadiene.

Partnerships in sustainability have continued to grow for Michelin in recent years. The tire maker in April 2020 partnered with Swedish tire recycler Scandinavian Enviro Systems A.B. to accelerate its tire recycling capabilities. In November that same year, Michelin embarked on a partnership with Canadian firm Pyrowave Inc. to explore how plastics recycling technology can yield commercially viable styrene for tires.

Recycled plastics already have proven to be an asset for Michelin. In April 2021, the tire maker validated the use of Carbios' enzymatic recycling technology for polyethylene terephthalate (PET) plastic waste in tire fibers for its tires.

"We're investing in high-tech materials so we can use renewable resources in all our tires and deliver to the market a fully renewable and recyclable tire by 2050," Garcin said. "At the same time, it allows us to create new applications in a range of industries—from aerospace to biotech.

"We feel it's our responsibility to provide for the consumer's needs today and tomorrow."

One of the pieces helping Michelin grow beyond the tire space in North America is Fenner Precision Polymers. The Michelin-owned company manufactures belting, molded goods, rubber sheeting, coating fabrics and seals.

And Fenner itself continues to grow. The company, in May, reached a deal to acquire Australia-based composite conveyor roller, idler and pulley manufacturer Conveyor Products & Solutions.

And this came on the heels of Fenner's October 2021 acquisition of Lumsden Corp., a Lancaster, Pa.-based maker of industrial conveyor belting and wire cloth for the quarry and mining industry. Michelin, at the time, touted the excellent growth potential the acquired company brought.

"The Fenner Precision Polymers businesses contribute to our ambitions around high-tech materials with its significant expertise and innovation," Garcin said. "It is a perfect fit as our purpose and values are aligned as organizations."