Pocket and planet pleaser

At the IAA, Michelin unveiled a tyre for the European market that it claims reduces fuel consumption by 1,7 l/100 km. CHARLEEN CLARKE caught up with the company’s president of truck tyres, Pete Selleck, and asked him about the new tyre and the challenges facing the industry.

FOCUS: Firstly, please tell me all about the new Michelin X Energy Savergreen line-up that was recently launched in Europe. Does it really offer a 1,7 l/100 km saving?
SELLECK: Yes; it offers that 1,7-litre advantage over rival tyre products. This has been verified by an independent test conducted by the TÜV. The tests were conducted using 315/80 R 22.5 Michelin X Energy Savergreen XZ and XD tyres and 385/65 R 22.5 Michelin X Energy Savergreen XT tyres.

FOCUS: Do they offer any safety benefits?
SELLECK: Indeed. They deliver enhanced grip, endurance and resistance to cuts and scrapes. This means greater safety for both people and merchandise.

FOCUS: Is this range going to be offered for all axles (front, drive and trailer axles)?
SELLECK: That’s right. We have the Michelin X Energy Savergreen XZ or XF for the front axle. For the drive axle, there’s the XD, which has double-wave sipes that increase tread life and provide superior traction. The tyre that we have introduced for the load axle is called the XT, which has strengthened sidewalls that are better able to withstand abrasive contact with sidewalks and traffic circles. They all have our Energy Flex casing, which helps reduce fuel consumption.

FOCUS: How does the casing chop the fuel bill?
SELLECK: Well, the crown accounts for 70% of the heat generated by a tyre as it turns, and the sidewalls and bead each account for 15% of the energy loss. These casings reduce energy loss, and consequently fuel consumption.

FOCUS: But what makes them so special? How do they achieve this?
SELLECK: There are three elements to the casings, which all play a role: a special rubber compound, thinner tyre components and more torsionally flexible steel cables.

FOCUS: This is obviously also very good news for the environment. But do you believe that transport operators actually care about saving the planet? It’s not a huge priority in South Africa; operators focus more on profitability.
SELLECK: In Europe, they do care. Yes, profitability still reigns supreme, but we commissioned a study that revealed that 68% of respondents support an environmental initiative that would involve reducing fuel consumption.

FOCUS: At the expense of profitability?
SELLECK: No. They’re in favour of protecting the planet, but there must also be a financial benefit for them. Which is exactly what we are achieving with the new range.

FOCUS: Turning to other issues now, are you able to meet demand? I have heard rumours of tyre shortages in some sectors.
SELLECK: True. Earthmover demand has exploded; we are running very tight on capacity in some segments. The world economy – particularly in terms of mining – is improving. Western Europe and, to a lesser extent Northern America, are struggling to come out of the recession. But we are experiencing massive demand in South East Asia, China, India, South America and Russia. It is really remarkable; the recession is definitely over there. The biggest surprise has been South America and particularly Brazil. Brazil has traditionally followed the western world in terms of its economic cycle – but this has not happened this time around. Brazil is showing good growth; government incentives have bolstered growth there.

FOCUS: What about a shortage of rubber? Are the plantations sustainable?
SELLECK: Yes. Our biggest concern right now is a fungus called Microcyclus ulei, which attacks rubber trees. It does not kill them but reduces their output. Most of the world’s rubber is grown in south east Asia, some is grown in Africa and there are a handful of plantations in Brazil. But there certainly isn’t a shortage. The price of natural rubber has risen from 60 US cents a kilogram 10 years ago to US$3,30 a kilogram today – so there is enormous interest in planting rubber trees (because of the financial rewards). It takes seven years for a rubber tree to be productive – and there is a lot of rubber coming on line around 2012.

FOCUS: Could the raw material price stabilise or even drop as a result?
SELLECK: Certainly. This will be very pleasing to the industry. We have focused on productivity improvements, in order to try to absorb rubber price increases. But there is only so much you can do. So we have had to pass some of the cost increases on to the customers. However, thanks to the recession, the increases have not been realistic – we have not received the price increases we needed to offset the raw material price increases. So margins are tight.

FOCUS: I attended the Truck Grand Prix in Germany recently, and I noticed that your brand was not involved in this form of motor sport. Could this change in the future?
SELLECK: You never know. We are involved in bicycle and car racing and 80% of the Dakar trucks are equipped with Michelin tyres. We could consider getting involved in truck racing – obviously we need to evaluate the potential return on this investment though.

FOCUS: Looking to the future, will your growth be organic or via acquisitions?
SELLECK: Most of Michelin’s growth recently and in the near future is through organic means. We are investing US$1 billion in China where we are building a new mega plant. We have an existing facility on the edge of Shenyang but have been asked by government to close that plant and build a new one in an established industrial park, to which we agreed. The first tyres will come out of that plant in 2012. In the first phase of the start-up, we will produce truck tyres only. This will be one of our largest plants in the world. We are dramatically expanding our plant near Rio – it will double in size. In fact, it will become the largest truck tyre plant in the world. And our first mega plant will open in Chennai, India, also in 2012. This is our first individual effort in India; we have tried to go into India in the past through joint ventures. But we were not successful, hence the decision to build this plant, which will produce tyres for trucks and buses. The plant in India will supply India but will also supply the Middle East and Africa. We currently have Indian employees who are training at our plants around the world; it’s very exciting.

FOCUS: So you are really investing in the BRIC market?
SELLECK: Absolutely. The only BRIC country where we are not investing right now is Russia, and I am sure we will open a truck tyre plant at some point in time. We already have a small passenger car plant in Russia.

FOCUS: And what of things in South Africa?
SELLECK: Well, it’s a challenging market for us. Our competitors have manufacturing plants; we do not. So we have to import all our products. But we have been successful; transport operators understand that, while they are paying a slight premium for our tyres, the overall cost of ownership is reduced through retreading and regrooving.

FOCUS: Do you believe that the South African market holds significant potential for you?
SELLECK: Yes. We have a presence in other African countries but only three – Nigeria, Algeria and SA – hold considerable potential.

FOCUS: In closing, what does the future hold for truck tyres? Where to next?
SELLECK: Well, we have set a goal. We believe that the number of cars and trucks on our roads will double by 2030. Our objective is to ensure that the environmental impact of transportation should be no worse than it is today. This is clearly a huge challenge, but this is an organisation that is not totally obsessed with this quarter’s results – we are conscious of having a positive impact on the world. That is why we will continue coming to the market with products that win in the cost department and are also green at the same time.