Michelin Warns of Worsening Auto Markets, Confirms Targets

(Bloomberg) -- Michelin stuck to its annual targets while joining a chorus of car-parts makers in cautioning the rest of year would be tougher than expected.

• The French tiremaker, formally known as Cie Generale des Etablissements Michelin, sees volumes growth in line with global market trends and rising profits this year, according to a statement Thursday. Operating profit rose 8% to 1.44 billion euros ($1.61 billion), beating estimates compiled by the company.

Key Insights

• The carmaking industry is under pressure from falling demand in key markets. Vehicle demand in China, the world’s biggest car market, contracted 12% through June, amid declines in the U.S. and Europe and forecasts for a tough second half of the year.
• Both Volkswagen AG and Nissan Motor Co. on Thursday said they’ll cut output. VW has shed 450,000 cars from its production plan -- roughly the size of one of its car plants -- and is open to reduce more should market deteriorate.
• French manufacturer Faurecia SA warned Tuesday that auto production could drop 4% this year, more than it initially expected. Michelin said it expects tire demand to contract 1%. The company is pursuing cost initiatives to counter the uncertain environment, CEO Florent Menegaux said.
• “We are faring well in a bad weather,” CFO Marc Henry told reporters on a conference call, citing Michelin’s firm pricing policy and firm grip on costs. The company’s profit margin still dropped to 10.3% from 11.3% a year earlier.

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• Follow the analyst call at 6:30 pm: +44 207 194 3759; Pin code: 43603957#
• Michelin Confirms Targets Amid Weaker Markets

To contact the reporter on this story: Ania Nussbaum in Paris at anussbaum5@bloomberg.net

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Elisabeth Behrmann

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