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Michelin Intends To Completely Abandon Russia, Local Management To Take Control

Michelin confirmed through a press release that Russia is no longer adequate for the tire manufacturing company to restart production. The list of reasons why this is happening doesn’t include the war waged on Ukraine. Here’s what’s going to occur and what this pull-out of Russia will look like.
Michelin's Bibendum Mascot 6 photos
Michelin's Bibendum MascotMichelin's EV TiresMichelin's EV TiresMichelin's Bibendum MascotMichelin's Bibendum Mascot
Michelin announced on Tuesday that Russia is no longer a country in which the company can do business. Over three months ago, on the 15th of March, the French tire manufacturer suspended production and exports in the country that has been put in a tough spot by Western sanctions. The factory remained mostly close while employees still received their salaries.

But things have now changed. Michelin says “it is technically impossible to resume production.” The company lists as reasons for this unfortunate situation many things that are very well known in the industry. The tire manufacturer also says there’s a “context of general uncertainty” in Russia.

The press release available at the end of this article states that Michelin plans to transfer all of its Russian operations until the end of the current year. Industrial operations, sales, and the administrative department would all remain in the hands of the current local management. The parties remaining in Russia will form a new entity that will operate independently of Michelin.

As any major company would do in their situation, Michelin can’t simply pack up and leave everything behind. The tire maker still has almost 1,000 employees on its payroll who, until March, helped with the manufacturing of over 1.5 million tires every year for passenger vehicles.

But the announcement made today doesn’t mean the company will sell everything and never return to Russia. A transfer of business may be simply a way to avoid dealing with temporary issues and leaves the door open to future cooperation or even a comeback. The tire manufacturer argues this is the best outcome possible for its employees at the Davydovo plant, which is situated approximately 100 km (62 mi) away from Moscow.

Michelin says Russia constitutes 2% of its total sales and just 1% of the global car tire production. This exposure amounts to almost €250 ($263) million.

Michelin’s planned pull out of Russia comes mere hours after Moody’s rating agency said Russia defaulted on its foreign debt for the first time in 100 years. Bondholders didn’t receive their interest payments.

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