The global economic system is undergoing significant transformation, presenting challenges for multinationals with cross-border supply chains. Michelin’s CEO, Florent Menegaux, asserts that the flexibility the company has developed over the last decade will help it navigate these turbulent times.
Menegaux notes that the world’s dynamics have shifted since COVID-19 and President Trump’s election in 2016, leading to global changes. Although Michelin operates in 175 countries, evolving international relations and geopolitical risks have come to the forefront. The onset of war in Europe has dramatically altered their supply chains; previously dependent on Russia for raw materials, Michelin had to swiftly redesign its supply routes.
The COVID-19 pandemic also impacted workforce management. Menegaux states that the lockdowns reshaped their approach to supply chains due to rising costs from inflation. It prompted Michelin to reconsider the definition of chaos and order, as the company adapts to a new global context.
Adapting its strategy, Michelin has enhanced its agility. A key aspect of this is the diversification into composites, which builds on the company’s existing expertise in tires. This pivot includes products like flexible tubing, timing belts, mining conveyor belts, rubberized fabric, and even medical composite components. Composites currently constitute 5% of Michelin’s business, but the aim is to increase this to 20% by 2030. The development of airless tires for NASA’s Artemis mission is a flagship project that may also benefit Michelin’s consumer tires.
Menegaux acknowledges the persistent global competition, especially from China—viewed as the primary competitor—but this is not a new phenomenon. Michelin has historically faced competition from various countries, but Menegaux sees this pressure as instrumental in advancing their technologies.
To address these challenges, Michelin has been adjusting its manufacturing footprint. Previously, European plants supported global exports, but shifts in the competitive environment have necessitated a focus on localizing production.
Tariff wars have also influenced globalization. Menegaux believes they will not halt globalization but may reshape it. Despite the challenges, such as differing tax and social conditions, he argues globalization has overall benefited the world by lifting millions out of poverty.
Michelin’s emphasis on localization and diversification of products makes the company somewhat less vulnerable to U.S. tariff challenges. Menegaux mentions that a significant portion of Michelin’s U.S. sales are domestically produced. Any potential changes in tariffs could prompt investment reevaluation, but in the short term, price adjustments are inevitable.
Menegaux concludes that the current state of globalization is not chaotic but represents a new order which Michelin will continue to adapt to. He highlights the need for Europe to have a new vision to play a central global role. The company’s focus on composites represents a significant, strategic shift towards greater flexibility and adaptability in a changing world.
