Raw Material Costs: Lower Wages Offset Higher Costs

Nov. 15, 2006
Michelin North America combats higher raw materials prices.

Aiming to combat rising raw material and energy costs, Greenville, S.C.-based tire manufacturer Michelin North America Inc. will be paying workers 20% less and asking those workers to contribute more to health-care coverage.

United Steel Workers at three BFGoodrich Tire manufacturing plants -- two in Alabama and one in Indiana -- have ratified a new labor agreement with Michelin North America.

"The North American tire market is one of the most competitive in the world, with increasing price pressure from vehicle manufacturers, unprecedented raw material and energy costs, and a surge of replacement market tires from competitors in lower-cost countries," says Jim Micali, chairman and president of Michelin North America. "Getting our labor costs in line with market rates and limiting our long-term liabilities are crucial to securing the future viability of our North American facilities."

According to the company, the European-based Michelin Group has absorbed more than 1 billion euros (US$1.26 billion) in additional raw materials costs.

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