http://www.businessweek.com/stories/2003-07-06/edouard-michelin

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Edouard Michelin


Four years ago, Edouard Michelin sparked a political firestorm after taking over the tire company founded by his great-grandfather. Thousands of angry Michelin workers protested outside corporate headquarters in the French town of Clermont-Ferrand in September, 1999, after the new chief executive announced plans to eliminate 10% of Michelin's European workforce. France's political elite, from Conservative President Jacques Chirac to former Socialist Prime Minister Lionel Jospin, lambasted Michelin for announcing layoffs on the same day the company posted a big jump in earnings.

But nobody's taking potshots at Michelin these days. With his zeal for cost-cutting and technological innovation, he has kept the world's No. 1 tiremaker on a roll, boosting margins and gaining market share even in a downturn. Operating profits rose 18% in 2002, to $1.4 billion, on sales of $18.3 billion. For the past 18 months, Michelin has outperformed the CAC 40 index of leading French stocks. Indeed, Michelin is proof that family-controlled companies, often derided as archaic and shareholder-unfriendly, can outshine their rivals in rough times. "Our company has to be an all-terrain vehicle," Michelin says.

The numbers tell only part of the story. Michelin, 40, has also shaken up the corporate culture since succeeding his father, Fran?ois, who ran the company for 44 years. For the first time, auto execs are being invited into Michelin's research facilities to advise on tire design. Unlike Michelin p?re, Edouard meets regularly with analysts and investors, though with Michelin family members holding a controlling stake in the company, there's little danger of a shareholder revolt.

Yet even as he pushes his company to open up, Michelin himself shuns the limelight. A soft-spoken father of six, he doesn't enjoy giving interviews. When asked about his role in revitalizing the 114-year-old tiremaker, he demurs, saying, "I'm very much against the star-ification of CEOs. What's most important is the team." Michelin's success doesn't mean it hasn't taken its lumps from the global downturn, which has clobbered the auto makers, who account for 30% of Michelin's business. The dollar's weakness has hit hard, too, because 40% of Michelin sales are in North America. Revenues reported in euros for the first quarter of 2003 fell 18%.

Still, Michelin would probably be doing worse if not for its young CEO. After joining the family business at 22, he ran a tire factory in France and then spent three years at Michelin's U.S. headquarters in Greenville, S.C. Working overseas, he says, made him realize that local managers should have more flexibility to carry out directives from corporate headquarters. And, as he watched Michelin digest the acquisitions of BFGoodrich and Uniroyal tires, the young executive became convinced that Michelin needed to hone its competitive edge by improving production efficiency and streamlining management.

Michelin moved quickly after taking the top job in June, 1999, cutting 7,500 jobs in Europe and launching a restructuring plan in the U.S. that yielded $200 million in annual savings. He also pushed Michelin toward the premium end of the tire business, dumping low-margin customers while focusing on high-performance products such as the $398 Diamaris, which is now fitted on BMW's popular X5 sport-utility vehicle. Profit margins rose to 7.8% last year, up from 6.6% in 2001. Michelin also wants to capitalize on the tire company's famous mascot, Bibendum, by launching a line of branded products, from tableware to car accessories. And he retuned to Michelin to Formula 1 competition after a 15-year hiatus -- no surprise, since he enjoys taking a spin in the sports cars used to test new tires. "At our testing centers, we have the most fabulous cars on the planet," he says. Michelin is in this race to stay.


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