More cuts are expected in the next quarters, with annual restructuring charges to involve approximately 1,500 people per annum. This is in addition to the attrition of approximately 4,000 people per annum (of which less than 50% being replaced). Thus, the net reduction of the workforce will reach approx 4,000 people per annum (5,500 gross).

“This will lead to significant labour cost savings. We expect the group’s labour cost sales ratio to reach 22% by 2010 (ie. closing the gap with peer group) or equivalent to an improvement of almost 200 basis points per annum. Management targets a 30% productivity gain by 2010, of which only one-third will come from the volume effect,” the Deutsche Bank analysts explained.

While Michelin had a labour cost/sales ratio of 29% last year, Pirelli’s and Continental’s labour cost/sales ratio were 21%, according to Deutsche Bank.