“Chaos is the new order”—Fortune 500 Europe Michelin CEO says agility is antidote to global trade wars

The global economic system is entering a period of radical change. For multinationals with cross -border supply chains, this is a problem. However, Michelin CEO, Florent Menegaux, maintains that the flexibility that his business has developed in the last decade will help him win through turbulent times.

“The world was different before Covid and before President Trump was elected in 2016,” said Menegaux. “These changes have triggered in the world. We are present in 175 countries in the world, but the world is evolving, in particular in relations between countries. The geopolitical risk that has always existed is now at the top of our program. We also saw the war in war suddenly in Europe, which completely changed our supply chains for these composites.

132

Michelin's Rank on fortune 500 Europe

Covid has also changed the way companies also manage their staff. “We thought that the movement was natural, and suddenly, more than half of the world was locked up,” continues Menegaux. “Then we had enormous inflation which quickly changed the way in which we also consider supply chains due to the sharp increase in costs. Everything that created a new world inside Michelin. We may be wrong to define chaos and order. Previously, we had a view of order, but now perhaps the chaos is the new order.”

A new strategy for the new chaos

“The question was whether our strategy was adequate in this new world,” said Menegaux. “Michelin has developed better agility.”

A way in which Michelin has improved its resilience to a chaotic environment is to diversify composite companies, where different materials are linked together to form a single substance. Tires have been composites for decades, so this corporate pivot has taken advantage of the existing business expertise. Michelin is now making flexible tubes, distribution belts, huge transporting taps to use in mining installations and rubberized fabric for inflatable boats.

175

The number of countries where Michelin operates

The company even manufactures tiny components composite designed to be surgically introduced into human bodies to repair damage. Composites currently represent only 5% of Michelin's activities, but the objective is that the proportion reaches 20% by 2030. The flagship composite project is Michelin's attempt to provide air -free tires for the Lunar Mission of the NASA Artemis Mission. “The development of this technology will also have many advantages for our daily tires that will be used on earth,” explains Menegaux.

Global competition has been built for years and there is no sign of what it is in the tire sector, even with new pricing regimes. China is the most obvious competitor now, but the threat is not new. “Over the past 15 years, we have been in massive competition with China, and this strengthens us, provided they obey the acceptable rules of the game,” explains Menegaux. “We have made many real progress in our technologies due to the pressure of China. When I joined Michelin, the pressure came from Japan. After that, we had Korea. Due to the size of China, it is very likely that a world or two world players, all over the world, will emerge, and after that, you will have one of India, and probably when you see something that goes from Africa. have seen more than 100 tire manufacturers in China emerge in 20 years.

“The question was whether our strategy was adequate in this new world. Michelin has developed better agility. ”

CEO of Michelin, Florent Menegaux

Michelin reconfiguration of its manufacturing footprint for years to deal with these changing market conditions. “We had many plants for historical reasons,” explains Menegaux. “We used to maintain our imprint dispersed in Europe because we were able to export from Europe. Now, the competitive environment is not enough for us to export Europe, so we must consider our footprint in Europe for Europe. ”

“We have revised how the global supply chain should be done,” said Menegaux. “For some time, we have had a local vision at local. The search for something critical to your production in the opposite part of the world may not be a wise thing unless you have to do so. For example, natural rubber trees do not grow in Italy. They only grow in a band of 200 kilometers north or south of the equator. But do you need to make things in China because it's cheaper?

The prices will not finish globalization, just change its nature

Current tariff wars aim to combat imbalances between manufacturing costs in different countries, but Menegaux believes that this will not prevent the inertia of globalization, which has been a clear advantage for the world. “We are already globalized now,” he says.

“However, the way this globalization is carried out can evolve. How do you make sure that wealth is uniformly divided between countries, but also between populations? If you are smarter, you can reduce costs. But if your cost structure is different due to tax or social conditions, it is false. The previous globalization was carried out on the premise of the way in which globalization has been sung elsewhere, or with fewer rules on environmental conditions. But in the world, the world has been good for the world, because environmental regions. But worldwide. People were out of poverty. »»

Michelin location and diversification strategies could make it less vulnerable to American tariff wars than certain global companies. “About 70% of what we sell in the United States is produced in the United States,” said Menegaux. “The prices will have an impact, but less of one might think. North America was built on the Alena agreement, which promised a free flow between Canada, Mexico and the United States, “this has become the USMCA under the previous presidency of Trump. “The sudden change in these rules will be ineffective for these three countries. The economy will suffer because of the prices, and citizens will suffer because it will mean inflation. It is impossible for us to change the supply chains overnight. If the prices remain for a few years, we will have to review our investment plans, and that it will take a decade before it is effective. ” In the short term, Michelin will have to increase its prices. “What will happen is that our customers will have to pay more, or they will go to less expensive offers from other brands. But we are better placed than most of our competitors. ”

Nevertheless, globalization changes even if it is not over. “It's no longer chaos, it's the new order,” explains Menegaux. “We are not qualified as chaos. We will adapt to this now. Europe should play a central role in the world, like China, like India tomorrow, like America. What we are missing in Europe at the moment is a vision. The vision where we built the EU was to make peace in Europe. We had to stop fighting because we share a land. We succeeded because we made it possible to make foundations. Europe. We need a new vision.

Europe should play a central role in the world, like China, like India tomorrow, like America. What we miss in Europe at the moment is a vision …

Florent Menegaux

The composite company is perhaps Michelin's most radical change to greater agility and a longer term plan. “With composites, we define a new commercial category that did not exist before,” explains Menegaux. But this is only part of a change towards greater flexibility. “It's like good cuisine,” concludes Menegaux – he is French, after all. “Sometimes you need more salt, sometimes you need a little more sugar. It is never the same thing. You adapt to certain conditions. It is more a question of adaptation to the instant priority of the moment, rather than modifying the long -term strategy. We are clear on where we want to go. We do not know exactly the course to get there.”

This story was initially presented on Fortune.com