Michelin: Winning Customers Over to Four Lives
If a retreading themed interview began with the sentence “we operate no retreading business”, than the interviewer has either turned up at the wrong appointment entirely – or is speaking with those in charge at Michelin. The focus of the French company’s commitment thus does not centre upon a marketable product or item, but on a concept – specifically, the concept that a Michelin commercial vehicle tyre has “Four Lives”. “Our concept is the most economic and most environmental on the market,” Jean-Marc Lechêne told Tyres & Accessories. The executive vice-president and chief operating officer (COO) for truck tyres in Europe is convinced that the ongoing professionalisation of truck fleets in Europe will further increase the establishment of professional (service) arrangements.
In Clermont-Ferrand, where the first radial tyre and the self-renewing tyre tread (based upon “Michelin Durable Technologies”) were developed, Michelin sees itself as a benchmark creator as well as a technological and innovative leader. And this, comments Jean-Marc Lechêne, applies to the retreading business area as much as to new tyres. The European market leader, to whom market observers attribute a 25 to 30 per cent share, therefore offers something that – according to the COO for truck tyres – is increasingly being emulated by its competition: the “Four Lives” concept. The idea itself is not new – it stands for ‘new tyre’, ‘regrooving’, ‘retreading’ and (again) ‘regrooving’ – and the manufacturer has operated in the retreading market for a good number of years. “In tyre markets the needs of our customers are becoming increasingly demanding,” said Lechêne, explaining a trend that is increasingly playing into Michelin’s hands.
While in previous years the servicing and upkeep of a fleet’s vehicles was typically the responsibility of the fleet operator and its own employees, business today has become substantially more complex, particularly in terms of the freight forwarding industry’s ever increasing competitive pressure. An example of this can be seen in that fleet operators are increasingly compelled to collaborate with specialised service providers in order to avoid expensive empty runs. Another example is a “24/7 breakdown service”. But for us the most interesting example focuses on a vehicle fleet’s tyre requirements. While responsibility for the provision and fulfilment of replacement tyre requirements previously also typically lay with the operator and its drivers, today such services are being readily farmed out to specialised tyre management service providers; outsourcing has become the word of the moment. Constantly changing customer expectations and needs are helping Michelin’s ongoing establishment of the “Four Lives” policy in the marketplace. The reason behind this is that fleet operators are increasingly handing over decision making on how the mobility of its vehicles’ tyres will be guaranteed to tyre industry professionals. The customer simply has to sign a “Michelin-Fleet-Solutions” cost per kilometre contract and after that not concern itself at all with tyre related issues.
These days, the proportion of operators taking only tyre price into account when considering replacement tyre needs is shrinking. The phrase “total cost of ownership” is no longer unfamiliar to logistics and tyre industry professionals. A tyre is not just another item with a price tag attached; rather, it is viewed as a production factor greatly influencing a vehicle’s operating costs through its rolling resistance and wear and tear. Furthermore, for Michelin the environment is not a question of image but rather a “responsibility”, as the company outlines on its corporate website, and consequently, alongside the obvious economic saving potential offered by a Remix retread including two regrooving procedures (a new tyre’s mileage is extended 150 per cent for significantly less cost than the purchase of two new tyres), environmental considerations play a very central role, Jean-Marc Lechêne points out. Specifically, resources can be conserved. While over a five-year period a standard tractor unit belonging to a Michelin customer would ‘go through’ around 1,500 kilograms of natural rubber as part of a “Four Lives” programme (this quantity, of course, always depends upon driving performance), for customers of the company’s Japanese and American competitors this figure is more than 2,000 kilograms. And users who have taken to Chinese tyres are consuming more than 3,700 kilograms – far more than double the resources accounted for by a Michelin equivalent. “From an environmental perspective, tyres from China are folly.” Of course, Lechêne adds, customers don’t pay much for Chinese products, but then they don’t get very much – apart from used, or wasted, raw materials.
The starting point of the Michelin “Four Lives” policy naturally is and remains the new tyre. However, as Jean-Marc Lechêne repeatedly emphasises, “today we do not sell any new tyres, but four lives.” For some new customers the three lives following the new tyre’s initial use is not just a theoretical possibility; rather they purchase the retreading and two regrooving procedures along with their new tyre; Michelin provides an instalment payment financing arrangement to cover this. During sales appointments Michelin’s field staff always emphasise to customers what the “Four Lives” policy entails, Michelin’s European head of truck tyres notes. And even though the “Four Lives” cycle begins with a new tyre, in several European countries a so-called “starter packet” is offered, under which a customer can have two new tyres mounted on his tractor unit’s steering axle and four retreaded tyres on the drive axles – an introductory offer the market leader does not often need to promote, as these tyres are generally considered to be technologically advanced and Michelin does not need to further demonstrate this.
This technological leadership also covers the technique through which new Michelin tyres are retreaded during the “Four Lives” process: Remix. In order to guarantee retread quality à la Michelin, the French company operates five retreading facilities in Europe; these are located in the five largest and most important markets: France (Clermont-Ferrand), Germany (Homburg), Great Britain (Stoke-on-Trent) Spain (Valladolid) and Italy (Alessandria); in the coming year a further Remix retreading facility will enter operation in the tyre factory at Davydovo, near Moscow. Incidentally, the Remix plant in Homborg was established in 1971, just as the new tyre facility there was – further credentials that show retreading is not seen at Michelin as being standalone.
Acting as guarantor for the high quality of Remix, according to Jean-Marc Lechêne, is the mechanised and thus highly complex production process; the Remix production process has more in common with new tyre plants than with conventional mould cure retreading. “I would be surprised if other retreaders could reach comparable results as us. Small details often account for large differences,” the COO continues. The Remix bead-to-bead mould cure retreading procedure also utilises specific vulcanisation moulds that enable the retreaded tyres to be manufactured with self-renewing tread, as for example with Michelin’s X Multiway XD, which is based upon “Michelin Durable Technologies”. With this in mind, it can be seen why the removal of the tyre from the vulcanisation mould is so critical to the retread’s quality, but there are other further steps in the production process that would be difficult to replicate outside of a mechanised environment.
The potential to regroove twice also reveals the French manufacturer’s credentials as a technological leader in this area. To accommodate this process, the Michelin casing is designed with additional rubber beneath the original tread so the tyre can be regrooved by an expert with confidence that its steel cord layers will not be damaged. And in the unlikely event that an end user should have no need for regrooving or retreading, he still possesses an “extremely valuable casing” that, adds Lechêne, can attain a market price twice that of competing products.
The utilisation of casings as a commodity is, however, not an integral component of the “Four Lives” policy. Yet the fact remains that even today “some customers are cautious regarding regrooving and retreading”. To counter this, in recent years Michelin has freed itself from its traditional reserve towards the buying public and invited its customers to tour its Remix production sites. Such confidence building measures have been exceedingly positively received by the market and can even convince those stubbornly opposed to retreading about the benefits “Four Lives” retreading can offer. Beyond this, during the “crisis year” of 2009 retreading enjoyed a certain home ground advantage over new tyres. Even those fleet operators that – either partially or completely – maintained an indifference to retreading may through their cash flow problems have gained an impression of the advantages of “Four Lives”; and of the offers from other market players.
According to Michelin, during the past year the European new truck tyre market has slumped some 18 to 19 per cent, while the retreading market has been hit by a comparatively moderate decline of 10 to 12 per cent. However doubt exists as to whether the strong figures of 2007, the last full year before the crisis, can be reached in 2010. Even so, in 2010 end users will still struggle with cash flow problems, and this should help retreading to acquire an even larger market share at the expense of new tyres.