Since early 2006, US-born Pete Selleck has headed Michelin’s worldwide truck tyre business. Tom Cunningham meets him in Shanghai to learn what part the UK plays in the firm’s global strategy. Michelin often uses the UK as a business model, according to Selleck.
"The market is very competitive, which gives us a good indicator of things to come," the ultra-confident Selleck comments openly during a private audience at Michelin’s Challenge Bibendum event in Shanghai.
The unambiguous ex-US Army officer says the British Isles are a frequent blip on the global radar because the UK market has no single (dominant) truck-tyre player. "In France, Michelin has blanket coverage in Japan, it’s Bridgestone. But across Great Britain, the fleet business is open to any manufacturer who can provide a decent product at the right price," he remarks.
Selleck’s 25-year career has seen him rise though the Michelin ranks, initially employed as an industrial engineer at the company’s huge plant in Greenville, South Carolina. From engineering, he went on to work on quality control and production, before heading manufacturing at Michelin’s eight US factories. At the time, Selleck reported directly to a certain Carlos Ghosn, the flamboyant man who went on to make his name as chief executive of the Renault Nissan car empire. In 1996, Selleck took charge of the US car refit business, which paved the way for a move to Clermont-Ferrand in France in 2003. He was in charge of European car and light truck refit before assuming his current role.
When Selleck mentions ‘fleet’, it’s because the company continues to set out its stall with large fleet sales in mind. But with enormous volumes come equally large risks. "Regardless of whether you’re charging cents or pence per mile, you’ve got to know what you’re doing," he says. "No one wants to sit in front of a customer to tell them they got it horribly wrong."
We were speaking after Selleck’s recent visit to the Birmingham headquarters of Michelin’s UK distribution arm, ATS Euromaster. The retailer’s lacklustre performance is no secret in the radial tyre industry but, although he’s not directly responsible for policy, Selleck is positive about it: "As a European-wide group, Euromaster is profitable," he points out. "Our UK operation has been through some tough times, but we’re starting to see progress and a return to a healthy balance sheet."
It might be tempting, one could argue, for Michelin simply to offload cheap tyres on to ATS, instantly boosting profits. But that’s not going to happen. "Although it is part of the Michelin family, we have to play fair and treat ATS like any other customer. We try very hard to maintain an independent position with every one of our refit customers, not only ATS." The same set of rules could be said for the UK firm. With competitors having a hand in similar distribution networks, favouritism towards one party could lead to an unnecessary price war at best and, at worst, chaotic scenes.
The UK business model can be seen as a favourable barometer for competitive trends. In other parts of the world, however, Michelin works slightly differently. The US, for example, ‘doesn’t do’ regrooving and, according to Selleck, probably never will. "The distributors influence the way in which tyres are sold in the States. Anything that prolongs the life of a tyre has a detrimental effect on sales volumes and for that reason alone, I see no reason for change," Selleck explains.
OE trends
Selleck’s remarks on the original equipment (OE) business came as a bit of a surprise. Not so long ago, Michelin had a commanding 60% of the European market, although that figure has since receded to what Selleck calls ‘a much more manageable’ 40%. Worldwide, the current figure is 30%. "At the time of our higher OE volumes, the market cycle was relatively violent you couldn’t manage the peaks and troughs as truck production ebbed and flowed," he explains.
"In the end, it became a real issue. So we took the decision to reduce our presence in favour of the refit market, where volumes are a lot more manageable and, I have to say, predictable." In the current climate, Michelin couldn’t go back to its 60% OE supply, even if it wanted to, because its truck tyre production plants are operating at full capacity. "If I could go down on to the shop floor and make one extra truck tyre, I would," Selleck jokes.
Uncertainty
Refit accounts for 85% of all global truck tyre sales. With an estimated 165 million tyres sold annually around the globe, that’s a lot of rubber. The car tyre side of the business currently makes more profit than truck, which is probably one of the reasons a forward-thinking man like Selleck was given the job in the first place. Gains are already evident. The bigger picture for all tyre manufacturers continues to look ominous, though. As globalisation-led freight volumes continue to rise, so do mileages covered. Indeed, Michelin’s own statistics point to a direct link between growing GDP and distances travelled. And Selleck is looking ahead: he believes further investment in innovative tyre sizes, continued research into reducing rolling resistance and a general rationalisation of production methods will see the company stay at the forefront of tyre technology. (Tire Review/Akron)
