“Chaos is the new order” – Forture 500 Europe Michelin CEO says Agility is antidote to world commercial wars

The world economic system is entering a radical period of change. For multinationals with cross -border supply chains, this is a problem. However, Michelin’s CEO, Florent Menegaux, argues that the flexibility that his company has developed over the last decade will help prevale through turbulent times.

“The world was different before Covid and before President Trump was elected in 2016,” says Menegaux. “This triggered changes worldwide. We are present in 175 countries worldwide, but the world is evolving, especially in the relationships between countries. The geopolitical risk that has always existed is now at the top of our agenda. We have also seen that the war suddenly reached Europe, which has completely changed our supply chains. We depended a lot on the raw materials and during the night we had to change all our raw materials and during the night we had to change all our raws. and for components.

132

The Michelin’s range in the Fortune 500 Europe

Covid also changed the way companies manage their staff. “We thought that the movement was natural and suddenly more than half the world was closed,” continues Menegaux. “Then we had a huge inflation that quickly changed how to foresee supply chains due to strong costs.

A new strategy for the new chaos

“The question was whether our strategy was adequate in this new world,” says Menegaux. “Michelin has developed a better agility.”

One of the ways that Michelin has improved his resilience in a chaotic environment is diversifying businesses in compounds, where different materials come together to form a single substance. Tires have been composed for decades, so this pivot business takes advantage of the existing experience of the company. Michelin now makes flexible tubes, distribution belts, large conveyor belts to use them in mining installations and rubber fabrics for inflatable ships.

175

The number of countries where Michelin operates

The company even manufactures tiny compound components designed to be surgically introduced to human bodies to repair damage. Currently, compounds are only 5% of Michelin’s business, but the goal is to reach 20% by 2030. The composite compound project is the possibility of providing unaccotic tires for the Lunar land vehicle of the NASA Artemis mission. “The development of this technology will also have many advantages for our daily tires to be used on Earth,” says Menegaux.

Global competition has been building for years and there is no sign in the tire business, even with new fares. China is the most obvious competitor now, but the threat is not new. “For the past 15 years, we have been competing a lot with China, and this strengthens us, as long as they obey the acceptable rules of the game,” says Menegaux. “We have made a lot of real advances in our technologies due to the pressure of China. When I joined Michelin, the pressure came from Japan. After that, we had Korea. Due to China’s size, it is very likely that one or two global players, around the world, more than 100 China tire manufacturers arising in 20 years.

“The question was whether our strategy was adequate in this new world. Michelin has developed better agility.”

CEO by Michelin, Florent Tegaux

Michelin has been reconfiguring his manufacturing footprint for years to deal with these changing market conditions. “We had many plants for historical reasons,” says Menegaux. “We used to hold our footprint dispersed in Europe, because we were able to export outside of Europe. Now the competitive environment is not suitable for exporting outside Europe, so we have to foresee our footprint in Europe for Europe.”

“We have reviewed how the global supply chain should be made,” says Menegaux. “We’ve been over a local vision for a long time. Getting something critical to your production from the opposite side of the world may not be a wise thing unless you are forced to do it. For example, natural rubber trees do not grow in Italy. They only grow on a 200-kilometer or south side of Ecuador. But do you need to make things in China because it is cheaper?

The rates will not end globalization, just change their nature

Current fare wars are aimed at combating imbalances between manufacturing costs in different countries, but Mentegaux believes that this will not prevent the inertia of globalization, which has been a net profit for the world. “We are already globalized now,” he says.

“However, the way this globalization is made can evolve. How do you ensure -wealth is evenly divided between countries, but also among the populations? If you are smarter, you can reduce costs. But if your cost structure is different due to social or fiscal conditions, it is wrong. The previous globalization has been done very well in the premise of finding something cheaper or less in terms of any other place or less registered in terms of Environmental.

Michelin’s location and diversification strategies could make it less vulnerable to the United States fare wars than some world companies. “About 70% of what we sell in the United States occurs in the United States,” says Menegaux. “The rates will have an impact, but less than one may be thought. “Suddenly, changing these rules will be ineffective for these three countries. The economy will suffer due to rates and citizens will suffer because it will mean inflation. It is impossible for us to change the supply chains at night. If the rates are for several years, we will have to review our investment plans and take a decade before it is effective.” In the short term, Michelin will have to increase his prices. “What will happen is that our customers will have to pay more or will go to cheaper offers from other brands. But we are better than most of our competitors.”

However, globalization changes even if it does not end. “It’s no longer chaos, it’s the new order,” says Menegaux. “We do not describe it as chaos. We will now adapt to this. Europe should play a central role in the world, such as China, like India Tomorrow, as America. What we lack in Europe right now is a vision. The vision when we built the EU was to make peace in Europe. We must stop fighting between us, because we share a land. We have been successful. Europe.

Europe should play a central role in the world, like China, like India tomorrow, like America. What we lack in Europe right now is a vision …

Florent Tegaux

The Composites business is perhaps Michelin’s most radical change to greater agility and long -term plan. “With compounds, we are defining a new business category that did not exist before,” says Menegaux. But it is just part of a change to greater flexibility. “It’s like good cuisine,” concludes Menegaux: he is French, after all. “Sometimes you need more salt, sometimes you need a little more sugar. It is never the same. It is adapted based on certain conditions. It is more of a matter of adapting to the instant priority of the moment, instead of changing the long-term strategy. We are clear where we want to go. We do not know exactly the trip to get there.”

This story originally presented to Fortune.com

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