Faurecia and Michelin Report Profits Down on Europe Slump image

During the first half of the year, Michelin and Faurecia reported a 10% drop in profit, as automakers lowered prices on slumping demand in Europe.

Michelin, which is the largest tiremaker in Europe, reported profit down 13% to 1.15 billion euro in the first half of the year, while Faurecia, which is the largest maker of car interiors in the region, said that operating profit fell 16% to 256 million euro. The two companies are reducing expenses in the Old Continent, where the market is expected to decline for the 6th consecutive year, and begin to expand in Asia and other emerging markets.

Faurecia predicted that auto production in Europe will drop 3% to 4% by the end of this year, spurring car makers to reduce prices on the parts they purchase. The difficult situation in Europe forced Michelin to find solutions to reduce costs in the region.

“We don’t expect a rapid recovery in Europe,” Faurecia (EO) Chief Executive Officer Yann Delabriere said. “We have to adjust fixed costs to the new level.”

On June 10th, Michelin said it will end heavy-truck tire production at its Joue-les-Tours plant, near Paris, by the end of 2015. Faurcia will also cut fixed costs and the new measures will help the company save up to 50 million euro in 2013 and 100 million euro in 2014.

Source: Bloomberg