Michelin Plans to Scrap 2,300 Jobs; But No Layoffs

French tire maker, Michelin, has announced its intention to cut its workforce by up to 2,300 jobs over the next three years, but has assured employees that they will not be laid off and no plants will be closed.

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The announcement comes as Michelin (0OFM) launches a simplification and competitiveness project aimed at improving the agility and overall performance of its manufacturing, corporate and administrative operations by up to 5% per year in France.

Nearly 60% of the projected cuts will be based on either voluntary early retirement opportunities or on Group-supported voluntary severances. For each job that is eliminated, Michelin hopes to create another job through the development of its new businesses or job market revitalization programs.

Michelin is committed to keeping France’s assets at the heart of its strategy and is therefore investing in the modernization of its French manufacturing and operational capabilities in order to reinforce its overall competitiveness.

Florent Menegaux, CEO of Michelin, said, “The ultimate goal of this project is for France, the birthplace of Michelin, to remain a key country in the Group’s strategic transformation in the years ahead…Our economic responsibility is to improve our overall performance while developing new high value-added business projects.” (See 0OFM stock analysis on TipRanks)

J.P. Morgan analyst Jose Asumendi reiterated his Buy rating on Michelin two days ago and raised his price target from €110 to €125. This implies upside potential of around 20% from current levels.

Asumendi believes that 2021 should be a strong year for the European auto industry as sales continue to recover from the coronavirus crisis. Although issues such as emissions and autonomous driving still weighed heavily on the sector, the evaluation of suppliers is already slightly above the long-term average.

Consensus among analysts is a Moderate Buy based on 7 Buys and 3 Holds. The average price target €113.16 suggests upside potential of around 9% over the next 12 months.