Michelin reaches deal to sell Russian operations

DAVYDOVO, Russia—Michelin's Russian operations have sat idle for more than a year as the French tire maker worked out its exit strategy.

That plan is much clearer now.

On May 26, Michelin announced that it had reached a deal to divest its Russian businesses—Michelin Russia Tyre Manufacturing Co. L.L.C. and Camso CIS L.L.C.—to Power International Tires L.L.C., one of the main tire distributors in the country.

Details of the agreement were not disclosed.

Michelin's Davydovo facility—located about 65 miles from Moscow—opened in 2004 and manufactured both passenger car and light truck tires, according to the latest Global Tire Report. The facility has an annual capacity between 1.5 million and 2 million tires—mainly for passenger cars, Michelin said last year.

Overall, the plant accounted for about 1 percent of the company's global tire production.

Under Michelin, the facility employed around 750.

In its May 26 statement, the French tire maker noted that the Power International Tires was unable to take on more than 250 of the facility's employees.

"Aware of the fact that not all the staff could be taken on by Power International Tires, Michelin allowed those who wished to leave the company under good conditions to do so," Michelin said.

Ultimately, the divestment will cost Michelin "a few tens of millions of euros corresponding to currency translation differences." The expenses, the tire maker added, will be recognized as operating income in May and will not be allocated to the segments.

It will have no effect on the company's 2023 guidance.

All costs relating to the cessation of activities in Russia were accrued in 2022. The country, traditionally, accounted for roughly 2 percent of Michelin's global sales.

The divestment marks an end of an era for Michelin, which has had a presence in Russia since 1997.

When Russia launched its attack on Ukraine in February 2022, Michelin was among the first tire makers to cease operations in Russia. At the that time, Michelin had planned to turn the activities over to local management, and the operations were expected to continue operations as an independent entity.

The logistics of doing so, Michelin said May 26, proved to be more complicated than expected.

"The option to pass the activity onto local management was not possible due to major difficulties preventing these activities from being rendered autonomous," Michelin said.

Michelin is the third major tire maker to sell its Russian assets.

Nokian Tyres P.L.C., in October, reached an agreement to sell its operations to Russian synthetic rubber producer P.J.S.C. Tatneft. That deal, worth about $307 million, was finalized in March.

For Nokian the exit from Russia was significant, given that the country accounted for about 80 percent of its passenger car tire production. Moreover, Russia and Asia accounted for around 20 percent of the company's sales.

To this end, Nokian has taken steps to redefine its global footprint, calling the plan "the New Nokian." These steps entail growing capacity and warehouse space its plant in Dayton, Tenn., establishing third-party manufacturing agreements to help meet demand in the short term, and adding a $650 million plant in Romania.

Nokian broke ground on its Romanian facility May 15.

Continental A.G., earlier this month, finalized a deal to sell its tire plant in Kaluga, Russia, to S8 Capital. That facility had a rated capacity of around 3 million passenger car and light truck tires per year, according to the latest Global Tire Report.

Bridgestone in October put a for sale sign on its own Russian operations, but has yet to announce a deal.

Yokohama and Pirelli have signaled they will continue operations in Russia.