Michelin Performance and Responsibility Report 2007-2008

MICHELIN PERFORMANCE AND RESPONSIBILITY

2007 - 2008

This edition of the Michelin Performance and Responsibility report covers the years 2007-2008. It shows how we have put into practice the principles and values of our Company in our various areas of responsibility.

Michelin is committed to an approach of balanced and responsible long-term development, and the progress we make will be measured over time. We have therefore chosen to publish a complete version of our report every two years. In the intermediary years, we present the evolution of our key indicators in an updated summary, focusing on the facts and figures.

This document is available upon request from [email protected], or on our website www.michelin.com, along with the three other Michelin Performance and Responsibility reports and our reference document, the Michelin Performance and Responsibility Charter.

Finally, Michelin’s 2008 Annual Report, pages 161 to 178, contain the social and environmental information published in view of the law on New Economic Regulations, article L 225-102-1 together with the decrees and orders of February 20 and April 30, 2002 of the French Commercial Code.

Information available on the Michelin Performance and Responsibility approach

We are pleased to present the Michelin Performance and Responsibility Report 2007-2008! This edition has been structured around the tire’s life stages to better highlight the complete integration of our approach into our projects and day-to-day actions.

Significant progress was made in 2007 and 2008, in a challenging competitive context. All these achievements are the result of the work and the flawless commitment of the Company’s employees, and we wish to take this opportunity to thank them all for their courage and determination!

As always, the most efficient way to reduce the environmental impact of road mobility is to improve the energy efficiency of our products. Among other examples, launched in 2007 and 2008, our low fuel consumption tires – MICHELIN Energy Saver tires for passenger cars and MICHELIN X EnergyTM SaverGreen tires for trucks – bring reduced energy consumption and, therefore, additional savings to our customers while maintai-ning or improving performance in terms of longevity and grip. They contribute to the reduction of greenhouse gas and conventional pollutant emissions and provide our company with a very significant competitive edge – all the qualities of sustainable development!

But we have made progress in many other areas as well. To everyone’s great satisfaction, workplace safety continues to improve, the environmental performance of our plants is making steady progress, and an increasing number of renewable energy facilities are being set up. Progress has been made in our approach to diversity, our approach to industrial excellence has been widely deployed, with major employee involvement, in our research and initiatives in favor of ecosystems, and in many other areas which will be featured in the following pages.

This report is published during a period in which road trans-portation of people and goods is experiencing a slowdown and where our markets are suffering a severe downturn. Our teams remain mobilized to ensure the Company will navigate this challenging period, adapt to contracting markets and show flexibility and responsiveness.

More than ever, our performance and responsibility requirements are key. Certain projects will undoubtedly slow down but our objectives remain fundamentally the same, simply because the major issues facing road mobility and the success of our Company are still at the forefront. In particular, while the question of road transport energy sources becomes increasingly acute, our technical solutions will provide powerful

contributions to the emergence of more sustainable models. Our determina-tion to work for improved mobility is stronger than ever.

Road transport is at the dawn of technical revolutions, in particular in the areas of energy sources and types of engines. Michelin will be present, contributing to progress with highly innovative products.

We trust you will enjoy reading our report!

Michel Rollier Didier Miraton Jean-Dominique Senard

Message from the Managing Partners

Jean-Dominique Senard, Michel Rollier, Didier Miraton

2 Michelin Performance and Responsibility 2007-2008

13

4

5

2

Message from the Managing Partners

Table of contents 2

THE MICHELIN GROUP, A RESPONSIBLE, 4HIGH PERFORMANCE WORLD LEADER

Governance favoring responsibility over 5the long term

Our relationships with our stakeholders 6

A Company oriented toward Customers 7and the development of Employees

Giving a future to road mobility 8

The worldwide tire industry facing its 10challenges

Acting for the long term: our Michelin 12Performance and Responsibility approach

Controlling risks 14

A company on the move, proud of 16its teams’ accomplishments: achievements and development for 2007-2008

FOCUS: Acting to preserve ecosystems 18

Michelin Performance and Responsibility: 20A requirement at all stages in the tire’s life cycle

Stage 1 : TIRE DESIGN 22

Attentive to our customers’ expectations 23

The power of innovation, key to our leadership 24

The responsible performance of tires 25

Table of contentsWorking together to advance road mobility 26

FOCUS: Technological innovation: 27original contributions beyond the tire

Stage 2 : RAW MATERIALS, 28PURCHASING

Selecting the best raw materials 29

Promoting sustainable rubber cultivation 30

Selecting committed suppliers 32

Stage 3 : TIRE MANUFACTURING 34

Deploying our global industrial strategy 35while putting our values into practice

Deploying our best practices 36

Guaranteeing manufacturing quality, 37being accountable for our products’ safety

Providing attractive careers 38

Training to enrich one’s work 39

Safety at the workplace: exceptional 40progress over the past few years

Improving health and quality of work life 41

A daily commitment in favor of diversity 42

Taking action in favor of employment 44

Communicating with local authorities, 45helping communities

Environmental impact of our sites: 46remarkable progress

Reducing the impact of our freight transport 50

FOCUS: Michelin values in practice at the Homburg plant 51

Stage 4 : TIRE COMMERCIALIZATION 52AND USE

Brands and distribution channels for a strong 53presence in the markets

Developing our sales effi ciency and our 54distribution to better serve our Customers

Keeping consumers up to speed on 55our progress

A technological challenge: balancing the 56tire’s performances

Innovating to meet expectations 58in the personal users market

Responding to the challenges of 60sustainable development facing our professional customers

Michelin Fleet Solutions: reinventing our 62relationship with our customers, optimizing tire life

The durable performance of 64our Specialty tires

Safe driving begins with correct tire pressure! 66

Acting for road safety, beyond tires 67

Working to make road mobility easier, 68safer and more enjoyable

We measure our customer satisfaction 69

Stage 5 : END-OF-LIFE RECOVERY, 70A PROMISING FUTURE FOR END-OF-LIFE TIRES

Recovering end-of-life tires, 71an ambitious program

Recovery rates increase signifi cantly 72

ASSESSING OUR RESULTS, 74COMMUNICATING WITH OUR SHAREHOLDERS

Financial results and external evaluations 75

Loyal and attentive shareholders 76

Regular, transparent communication with 77our shareholders

Michelin in fi gures 78

Review report from one of the Statutory Auditors 79

Glossary 80

Respect

for

Customers

Respect

for

PeopleResp

ect for

ShareholdersResp

ect for

the Environment

Respect

for

Facts

The 2007-2008 Michelin Performance and Responsibility report is the fourth edition of our full report, published every two years. A summarized update is published every other year.

This time we have chosen to adopt a new presentation to describe the results of our Michelin Performance and Responsibility approach, oriented toward balanced and responsible development.

In this report you will be able to follow the five stages in the tire’s life, presented on pages 20–21, as they appear from the life cycle analyses carried out to assess the environmental impact of our activity.

Our aim is to show how, at all stages in the tire’s life, the fundamental values of our approach find concrete expression: Respect for Customers, Respect for People, Respect for Shareholders, Respect for the Environment, and Respect for Facts. This fifth value, Respect for Facts, is put into practice throughout the report.

Whenever relevant, both in the summary table presenting the main developments of our approach on pages 16–17 and throughout the five stages, the pictograms below indicate which of our five values are particularly at stake in the area concerned. This does not mean, however, that the other values are not being put into practice!

We will be pleased to receive your questions and comments at the following address: [email protected].

Michelin Performance and ResponsibilityA requirement at all stages in the tire’s life!

33


The Michelin group puts performance research and the exercise of its responsibility at the heart of its vision and strategy. From the Company’s foundation, Michelin’s stated mission has been to contribute to progress in mobility, making the basic choice to achieve this goal through innovation and quality. On several occasions, the Company has transformed markets by introducing technological breakthroughs, such as the radial tire in 1946, the first low rolling resistance tire in 1992, the truck tire with self-regenerating tread patterns, and now the MICHELIN Energy Saver passenger car tire and the MICHELIN X EnergyTM SaverGreen truck tire.

Because of Michelin group’s global dimension and the key role our products play in the development of improved mobility of people and goods, the Group has a major responsibility in the world of transportation. Michelin fully intends to assume this responsibility by putting into practice the principles behind our approach to sustainable development – Michelin Performance and Responsibility.

This approach is the formalization of the long-standing willingness of the Company to meet the industrial challenges facing us over the long term, to ensure our continued presence in the market, to meet our customers’ and employees’

expectations, to maintain quality relationships with partners and the communities in which we operate, to control and reduce our negative impacts and to take up these many challenges by putting into practice a fundamental value: Respect for People.

Today as before, our company will rely on its fundamental principles to overcome difficult times and continue its development.

The Michelin Group,

a responsible, high performance

world leader

55

The legal structure of the Group’s parent company favors res-ponsible and long-term oriented executive management.

The CGEM (Compagnie Générale des Établissements Michelin), the Group’s parent company, has the legal form of a partnership limited by shares. This legal structure was in widespread operation when the Company was set up; it guarantees a clear-cut separation between management and supervision functions and fosters stable, responsible management that aligns with shareholders’ interests and is capable of implementing long-term strategies.

Michelin has stayed true to this legal form in which there are two types of partners:

capital, nominate Managing Partners, whether General or Non-General, and approve the financial statements presented by the Managing Partners; they are only liable for the company’s debt up to the amount of their capital contribution and they receive a share of the profit in the form of a dividend.

Société Auxiliaire de Gestion – SAGES – made up jointly of members of the founding family, current and former Group executive managers and qualified individuals external to the Company; its sole purpose is to ensure the continuity

of the Company in the case of the demise of the Managing Partners and to convene an Extraordinary General Meeting of Shareholders, which will appoint a new Managing Partner.

Through his status as General Managing Partner, Michel Rollier is indefinitely liable for the Company’s debts against his personal assets. The General Partners’ remuneration is made up of a statutory share of profits, if there are any, subject to approval each year by Shareholders.

During the Annual General Meeting on May 11, 2007, two Non-General Managing Partners, Didier Miraton and Jean-Dominique Senard, were appointed to manage the company alongside Michel Rollier on a five year renewable mandate.

Stability and responsibility over the long termThe specific nature of this legal structure results in stable, long-term oriented corporate governance. The Managing Partner cannot resign his post, unless approval is given by a Shareholders’ vote at a General Meeting. The extent of his personal liabilities, together with the fact that his method of compensation entirely depends on the economic performance of the Company, which also determines the variable compensation of the Non-General Managing Partners, means that the General Managing Partner is closely linked to the development and health of the Company. This reinforces his

vigilance in terms of risk taking. The implementation of a robust and lasting approach to sustainable development is thereby made far easier.

The Managing Partners are assisted in their mission to run the Company by the Group Executive Council (CEG), made up of seven members chosen among the Directors of the Group’s entities.

Separation of the supervisory functionsThe Supervisory Board is made up of eight independent members and monitors the management of the Company (financial statements, internal control, strategy, governance) on behalf of the Shareholders. During the Annual General Meeting, it gives its opinion about the Managing Partners’ proposals and reports to Shareholders regarding its mission’s achievements. Finally, the Statutory Auditors undertake their various legal auditing functions and publish a report subject to approval from the Shareholders.

To find out more about the Group’s governance, please see the 2008 Annual Report.

The Group Executive Council: Éric de Cromières, Bernard Vasdeboncoeur, Florent Menegaux, Claire Dorland-Clauzel, Pete Selleck, Jean-Christophe Guérin, Jean-Michel Guillon

Governance favoring responsibility over the long term

Approve resolutions proposals for Extraordinary General Meeting of Shareholders

Management entity

Appoint after approval from General Partners

Reports on management to the Annual General Meeting of Shareholders

Reports on their monitoring functions

Ensures monitoring of management (financial

statements, internal control, strategy, governance)

Appointand revoke

Undertakelegalauditingfunctions

General Partners

- Michel Rollier - SAGES

Managing Partner Michel Rollier

Non-General Managing Partners

Didier Miraton Jean-Dominique Senard

Limited Partners Shareholders

Controlling bodies

CGEM’s governance principles

Supervisory Board

Statutory Auditors


Our relationships with our stakeholders

Distribution of income from business activities in 2008 (and in 2007)

The same responsible attitude toward all correspondentsAs supplier of capital goods vital to the mobility of people and goods and front line economic agent, Michelin group assumes responsibility commensurate with its worldwide dimension.

The diagram below is an approach to what we call our socio-economic footprint. We present the stakeholders with whom we maintain institutionalized and formalized relations, the economic importance of which we measure precisely.

With other stakeholders we also enjoy less institutional, sometimes less formal but equally significant and fruitful relations. In some cases, there is no economic relationship and

in others the economic relationship is specific and limited in time, for example our exchange of information with rating agencies, partnerships linked to sustainable development, relations with our industrial and R&D partners, media, NGOs, etc.

The vision portrays the complex network of relations established with our correspondents and enables us to mesure the respective economic importance, to better assess the issues we face and more accurately understand the consequences of our decisions in order to assume as fully as possible our responsibilities toward all our stakeholders.

And let us not forget that our products contribute in a very concrete manner to the economy and to the daily

life of hundreds of millions of people, enabling more than 180 million vehicles to take to the road and support exchanges of goods and worldwide activity. Although difficult to assess in quantitative terms, it is nevertheless an actual contribution and we are conscious of the resulting responsibility.

In 2008 our sales amounted to 16,408 million ( 16,867 million). Operating income was 920 million ( 1,645 million) and net income was 357 million ( 772 million).

Free Cash Flow stood at - 359 million ( 433 million).

16,408 million ( 16,867 million)

Customers

Dividends paid out on the results of the previous financial year.

Shareholders

240 million ( 217 million)

Purchases of goods and services.

Suppliers


Investments1,271 million

( 1,340 million)

Provision reversals and other operating income


Other income

Financial charges for banks and interest on bonds.

Banks - Creditors

334 million ( 264 milion)

Compensation, benefits and allocations to the various pension funds.

Personnel


Local taxes, tax on profits.

States and local authorities


7

The organization of the Group is structured around a single goal: serving our Customers. It also reflects our willingness to contribute to the development of People.

Developing People and the CompanyThe strength and development of the Company are based on the skill and motivation of its employees. In order to contribute to Employee development and to the Company’s competitiveness, Michelin aims to offer individual professional advancement corresponding as closely as possible to the skills and expectations of each employee, by means of varied career paths, open to job changes and geographical relocation, and aligned with the Group’s strategies.

To achieve this result on a global scale, Michelin applies identical management principles at all sites, seeking fulfillment for all Employees in the service of the Customer: this is the goal of the Company and the Personnel Department through its career management process. Training is a key factor in achieving this result: it provides the opportunity to acquire or improve skills which enhance individual professionalism and improve the efficiency of the Company. Listening, dialogue, and mutual respect are the foundations on which Michelin wishes to establish relationships with employees, in all their diversity.

Three dimensions for greater responsiveness

Three dimensions – operational, functional and geographical – make up the Group structure.

The operational organization is founded on the Product Lines: Passenger car and light truck, Truck and Specialty Product Lines which include Aircraft, Earthmover, Agricultural, Two-wheel and Components (semi-finished products and tools). Two integrated distribution networks complete this structure: Euromaster in Europe and TCI (Tire Centers Incorporated) in the United States.

Other activities are organized in operational units: Maps and Guides, ViaMichelin digital travel information services and brand extension products manufactured under license, managed by Michelin Lifestyle Limited.

The Michelin Technology Center, responsible for the Group’s Research and Development, has three main centers based in France, the United States and Japan.

Functional support is provided by nine Group services (Audit, Communication and Brands, Finance, Information Systems, Legal, Personnel, Purchasing, Quality and Organization and Supply Chain Management) as well as by several Performance Departments: Commerce, Industry, Research-Development-Industrialization. They define the best methods and ensure their use worldwide. This system is completed by the Prospective and Sustainable Development Department.

Finally, six Geographical Zones ensure the consistency of the Group’s policies and action plans in Europe, North America, South America, China, Asia – Pacific and Africa – Middle East. This geographical organization will change in 2009 so as to be closer to these markets.

Tires: a core activityCombined Group net sales for all our activities amounted to 16.4 billion in 2008, -2.9% compared to 2007. Michelin is number one with a 17.1% share of the global tire market (2007 data).

In 2008, Michelin produced 177 million tires for all types of vehicles, from two-wheelers to aircraft, passenger cars to trucks, earthmover and handling vehicles to agricultural vehicles. Tires and associated distribution and support services account for the majority of the Group’s activity and constitute the Company’s core business.

In 2008, Michelin sold 16 million maps, plans, atlases and travel guides and its ViaMichelin internet sites received 400 million visits.

Michelin products are sold on all five continents, in over 170 countries. The industrial sites are located close to our various markets: at the end of 2008, we had 68 production sites in 19 countries.

A Company oriented toward Customers and the development of Employees

Europe

North America

Africa/Middle East, South America, Asia-Pacific

50.0%

31.0%

19.0%

Share of net sales by geographical zone in 2008

Seeking fulfillment for all employees in the service of the Customer is the goal of the Company’s career management process.

Net sales (billions of euros)

Tires produced (millions of units)

Headcount** (full-time equivalent)

2006

16.4

190

115,755

2007

16.9

192

113,529

2008

16.4

177

110,252

Key figures

** The data related to these indicators has been audited by PricewaterhouseCoopers page 79 .


To Michelin, it does not make sense for a service as vital as transport to rely on a unique, exhaustible energy source which is controlled as much by global geopolitical factors as by the usual laws of economics.

Limiting the impact on climateThis conclusion can only be reinforced when considering the impact of greenhouse gases resulting from the combustion of oil. Most scientists have reached the same conclusion, by 2050, in order to stabilize at + 2°C in 2100 compared to pre-industrial era, the average increase in the surface temperature of the planet, the concentration in CO2 equivalent should not exceed 450 ppm (parts per million). Yet current projections forecast a concentration of 900 ppm as a result of human activity. In order to reach an acceptable balance – which would nonetheless lead to important climate change – there is every need to act quickly and robustly.

take place in emerging countries, where the number of vehicles is increasing. Government awareness and implementation of the necessary means are making slow progress. International organizations, like the WHO (World Health Organization), are heavily engaged in this issue, as are road transport sector companies, through organizations such as the Global Road Safety Partnership page 67 , of which Michelin is a member. The challenge remains considerable and the results are clearly insuffi cient.

Energy sources: a real challengeThe issues of greenhouse gases, conventional pollutants and cost are causing us to look urgently at propulsion energy. Today, oil is practically the only one currently used by road transport and oil production in the years to come will barely meet demand. Oil needs continue to increase in the long term, in a context where price variations make it impossible to make stabilized projections. Moreover, the infl uence of oil is expected to become even greater. The estimated number of vehicles on the world’s roads, already consuming more than 40% of oil production, currently amounts to 800 million. This fi gure is predicted to double in the near future.

“The issue facing industrial companies in the fi eld of road mobility – particularly those, like Michelin, who want to exercise long-term responsibility in their sector – can be expressed in simple terms: if our development model fails to end our dependence on oil and limit CO2 emissions, it will be threatened to its very foundation. Answers are available and must be brought to market more quickly.”

Patrick Oliva, Director, Prospective and Sustainable Development.

As early as 2001, Michelin became an active member of the WBCSD (World Business Council for Sustainable Development) and is heavily involved in the Sustainable Mobility Project, the conclusions of which are clear: current trends in mobility – particularly road mobility – are not sustainable over the long term. Solutions should be found for the seven challenges of sustainable mobility see feature .

Toward greater road safetyEvery year, 50 million people are injured and 1.2 million killed in road traffi c accidents. Eighty-fi ve per cent of fatal accidents

Giving a future to road mobility

Because of its very specifi c position – important player in road mobility, but more willing than the car manufacturers to switch to innovative solutions – Michelin plays a very positive role. An important point seems to me to be the availability, today, of MICHELIN Green tyres. We have placed great emphasis in our report on the importance of promoting, especially in times of economic crisis, im-mediate solutions, which both reduce the emissions of CO2 and provide a concrete benefi t to the consumer.”

Professor Julia King,Vice-Chancellor of Aston University and the leader of the King Review on reducing the carbon impacts of road transport in the United Kingdom

“Until the fi nancial and then economic crisis of autumn 2008, the years 2007 and 2008 were almost entirely marked by increases in the price of oil. The price of a barrel of Brent crude oil passed the US$ 100 mark in February 2008 and exceeded US$ 140 during the summer of that year. It then fell below US$ 40 (source: US Energy Information Administration). These rises in the price of oil (72% in 2007 and 44% at the 2008 peak) unleashed fears of a shortage. This fear is however unfounded: proven oil reserves represent 40 years’ supply of conventional oil and 200 years’ supply of non-conventional oil (extracted from ultra-deep drilling, bitumen, etc.).

On the other hand, fears of seeing the price of a barrel rise again when the economic downturn is over are justifi ed. Delays in investment required to offset the lower yield of currently operational oil fi elds will hold back production growth. This is the main message of the IEA (International Energy Agency) in its report World Energy Outlook 2008.

Erratic oil pricesThe WBCSD (World Business Council for Sustainable Development), in which Michelin plays an active role, has identifi ed seven challenges for sustainable mobility for 2030:

where they do not constitute a signifi cant public health concern anywhere in the world;

to tolerable levels;

serious injuries worldwide;

and between the world’s richest and poorest countries;

both in developed and developing countries.

Seven challenges for more sustainable mobility

9

A responsible sector of activityThe road transport sector produces 18% of fossil CO2

emissions (those linked to the use of fossil fuels) and 9.8% of anthropogenic greenhouse gas emissions. Therefore, this sector cannot rely on the efforts of others and must take part in the overall progress. To avoid the “900 ppm” scenario and return to the “450 ppm” target in 2100, the quantity of CO2 generated by human activity must be roughly halved by 2050. In the case of road transport, the 5 gigatonnes of CO2

(5 billion metric tons) emitted in 2008 must be reduced to 2.5 gigatonnes by 2050, notwithstanding the increase in the number of vehicles. Is this possible?

A change of model is possibleMichelin’s answer is yes. Year after year at Challenge Bibendum, a meeting for sustainable mobility organized by Michelin since 1998 page 26 , we see the progress made by car manufacturers around the world. During the 2007 Shanghai event, a mass produced car, the Renault-Dacia Logan, which had been specially adapted with currently available technology (including MICHELIN Energy Saver tires) achieved CO2 emissions of 71 g of per kilometer. Gasoline-powered engines are capable of savings of at least 30% on their current efficiency level and with a reduction in vehicle mass may bring emissions down to below 100g of CO2/km.

With electrically-powered engines, in many cases it will be possible to reach the 20 g-70 g of CO2/km range (well to tires).

The fundamental challenges facing large cities

The challenges of noise, conventional pollutants and traffic congestion particularly affect large cities, whose number and size are constantly increasing: it is estimated that 65% of the world’s population will live in urban areas by 2025. Faced with the specific issues of urban mobility, some distinctive answers are emerging and vehicles specifically adapted to urban areas, in terms of size, engine type and noise, are beginning to appear. Modes of transport are becoming specialized and multimodal mobility has undoubtedly a fundamental role to play.

Toward a framework for global cooperationPartnerships and collaboration must take place at continental and global level so that companies may work within a clearly established framework and within a timeframe which is compatible with financial commitments. Solutions will only be implemented through medium to long term prospects. Michelin has been involved for several years, launching the Green tire in 1992, the year of the Rio Summit and organizing the first Challenge Bibendum meeting in 1998, a year after the Kyoto Summit. European Union guidelines for the reduction of greenhouse gas emissions by 2020 are a target and the role that

tires can play in this is clear. However, regulations need to be set out at a global level if we want to avoid parasitic effects, and the Copenhagen Summit taking place in December 2009 will be decisive for the future of road transport and other industries.

Tires are indispensable to economic activity: freight handling equipment on tires at work in the port of Barcelona.

Road mobility in large built-up areas, such as here in Shanghai, is a major issue for their development.

Transport-related Well-to-Tires CO2 by mode(Gigatonnes CO2 - Equivalent GHG Emissions/Year )

50

Total Two- + Three-Wheelers Buses Freight + Passenger Rail

Water Air Freight Trucks Light Duty Vehicles

Source: WBCSD Sustainable Mobility Project calculations

15

12

9

6

3

000 10 20 30 40

Reference scenario, it appears to us that we must transform to ensure a more sustainable future in road mobility.


The next 11 manufacturers represent nearly 30%. Local and niche players – some of whom are experiencing strong growth – make up the remaining 20% and now we are witnessing the emergence of new players within the market sector. This change leads the large tire manufacturers, with Michelin at the forefront, to maintain their innovation and technical differentiation strategy.

Making the difference through innovation is an absolute necessityIn a context of increasing volumes and ever more sophisticated products, tire markets will experience major changes in the medium term. These changes are linked to the necessity to save energy and raw materials, the continuing research into greater safety and new health and environmental protection requirements. Here too, tire innovation is a key element of progress in mobility.

Producing where we sellThe consequences of the strong growth in Asian markets until late 2008 are felt on two levels: the appearance of new tire manufacturing competitors in China, India and South Korea and the clear need to locate production centers close to the markets

Globally, two types of markets exist:

Europe, Japan, the US, Canada and now South Korea – show a slow rate of growth, but represent a vast number of vehicles and a demand oriented toward top-range tires.

Asia, South America, and particularly China, India and the ASEAN countries still represent a smaller number of vehicles, but are growing at a higher rate of around 9 % per year during periods of stability.

Until mid-2008, the growth in demand in these two types of markets were comparable, and the growth of one market com-pensated for the larger volume of the other.

From concentration to the emergence of new playersIn the early 1980s, the market was dominated by about ten tire manufacturers. Concentration within the sector since then has brought about the emergence of today’s three world players, Michelin, Bridgestone and Goodyear. But while in 1999 the total of their net sales accounted for over 55% of tire sales ex-pressed in volume, this proportion dropped below 50% in 2008.

The dramatic downturn tire markets experienced in late 2008 is unlikely to fundamentally change the long-term growth trend worldwide, once the crisis is over. Likewise, the decrease in the price of raw materials and oil is expected to be temporary, mobility needs being a cornerstone in the development of emerging countries.

In 2007, the worldwide tire market was estimated at US$ 127 billion (source: Tire Business, September 2008); tires for passenger cars and light trucks made up 60% of this fi gure, while truck tires accounted for 30%. This market has more than doubled over the last twenty years and while it is currently sub-ject to a temporary contraction, its medium and long term pros-pects remain robust. The mobility of people and goods, closely linked to economic development, is driven by growth, which will pick up again in several major countries throughout the world.

After the current lull, we predict that the tire market will regain a long term annual growth pattern of a few points per year. This progression is more steady than that experienced in the automotive market, which is subject to shorter cycles, because the tire market relies on both original equipment sales (28% of the market) and replacement sales (72%).

The worldwide tire industry facing its challenges

Michelin 17.1% Bridgestone 16.9% Goodyear 14.9% Continental 5.9% Pirelli 4.5% Sumitomo 3.2% Yokohama 2.9% Hankook 2.7%

Cooper 2.3% Kumho 2.1% Toyo 1.7% Cheng Shin 1.7% GITI + Gajah Tunggal 1.4% Triangle 1.0% Others 21.7%

The global tire market in 2007(in US dollars)

Source: Tire Business-September 2008

The long term increase in the cost of raw materials appears to be a structural phenomenon, despite the considerable downward variations following the fi nancial crisis which began in 2008. Because production of these materials remains limited and consumption is increasing in rapidly developing countries such as China and India. The cost of the main components of the tire – natural rubber, oil-derivatives or steel – has been increasing for several years. This increase in the cost of raw materials has an impact on the tire sale price, which the market has up to now been able to accept. Nevertheless, this is a major preoccupation which is encouraging new technological developments.

More expensive components in the long term

11

to offer customers the best price, to respond to demand and to deliver quickly. Indeed, introducing long and complex logistical networks, originating from distant bases, is clearly a drawback when on the one hand our customers expect us to be highly responsive and to provide immediately available products, and on the other hand, we are constantly looking to reduce our inventory. Moreover, transportation costs between different geographical zones reduce, or even negate, the differential in the production cost with sufficiently dimensioned productive plants and specialized sites achieving a competitive cost price. It is for these reasons that producing where we sell remains the best strategy, in both mature and developing markets.

An ever-increasing variety of tires

Responding ever more precisely to the demands of our customers by product differentiation has been a constant trend in recent years. Even the emerging markets, which were until

recently served with a limited number of product references, have seen strong demand for a wider variety of products. The larger tire manufacturers in particular are responding to this demand and this has consequences for the organization and flexibility of industrial plants. For all these reasons, Michelin is maintaining its industrial policy: relying on a network of world-class productive facilities, located in both developed and emerging countries, based on the growth and requirements of the local market.

What are the future trends?After the drop in markets in late 2008 and their probable return to growth due to mobility needs, structural effects on consumer habits will probably be noted. Energy costs will increase again due to the limited availability of resources, and will lead to a change in the use of existing means of mobility and their necessary adaptation. The introduction on the market of

electrically-powered vehicles, both hybrids and 100% electric, will increase the importance of tire energy performance, which has a direct impact on driving range, the current weak point of these vehicles. In the case of an electrically-powered vehicle we may consider that the tires’ rolling resistance accounts for 30% of all forces to be overcome in order to move the vehicle forward. All progress made in this area is therefore of great significance!

The market players’ capacity for innovation will be even more fundamental to their development. The tire market, which is considered to have reached maturity, will now undergo profound change, with customer expectations turning more markedly toward both economic and environmental aspects (ratio between purchase price and longevity, fuel savings and noise), without sacrificing safety expectations. Providing new and truly innovative technical answers remains more than ever before the key to success.

EV-Light, an electric vehicle powered by Lithium-ion batteries, was one of the Michelin prototypes on show at Challenge Bibendum 2007.

Global tire market 2008: Original equipement and replacement distribution(2008 data expressed in volume)

Original equipment Replacement

28%72%

Passenger car/light truck

Original equipment Replacement

17%83%

Truck

Michelin estimates.

Europe 32% North America 28% Asia 27% South America 6% Africa/Middle East 7%

Passenger car/light truck

Europe 18% North America 16% Asia 44% South America 11% Africa/Middle East 11%

Truck

Global tire market 2008: distribution by geographical zone(2008 data expressed in volume)

Michelin estimates.


sustainable development team was set-up to be responsible for project follow-up, benchmarking, monitoring and reporting. These ten themes are still relevant today, even if they are dealt with as part of regular activity rather than in project mode.

Defi ning the principlesThe foundation stones of our approach have been laid: the basic principles have been defi ned and our fi ve values expressed in terms of “Respects”. However, this statement of our vision of sustainable development must be developed and explained in detail in order to constitute the reference document which will enable the entities to plan their initiatives and our employees to adapt their way of working. This is the role of the Michelin Performance and Responsibility Charter, a reference document translated into 15 languages, 30,000 copies of which have been distributed internally. The Charter, which is widely available both inside and outside the company, aims to set forth in writing what was, until its publication, strongly present in the oral culture of the Group. It has facilitated the rapid communication of our approach across our organization and particularly to those structures which have joined the company more recently. It also allows us to explain to our external contacts who we are and what are our orientations.

tires. Even as early as 1998, the fi rst of our plants to receiveISO 14001 certification was Campo Grande, in Brazil. Our regional job creation assistance activity, Michelin Development, started in 1990 in Clermont-Ferrand before being extended to Europe and beyond. Thus, our current approach is primarily the structured and concrete expression of our corporate culture rather than a new concept. The fundamental values of Michelin Performance and Responsibility are simply the original values of our company, which have been gradually enriched over the years. Being able to link our approach both to older initiatives and principles has undoubtedly been a determining factor in its smooth integration into our day-to-day way of working.

Identifying the relevant issues

At the time of launching such an approach, the relevant issues need to be identified, where the company’s activity has an impact, whether positive or negative, on its environment, in the widest sense of the term. The Company’s strengths and weaknesses also have to be assessed in the face of these issues, in order to select those which need to be looked at as a priority. This is what we did during an internal assess-ment in 2002. From this, we drew up a list of ten themes see feature , and for each one of them, we appointed a global project leader with a mission to conduct a detailed assessment of our original situation, to defi ne progress objectives in line with our fundamental values, to organize the deployment of new initiatives and to monitor the results. At the same time, a small

Michelin’s ties with sustainable development issue are both recent and historical. Indeed, although our current approach was formalized in 2002 at Edouard Michelin’s instigation and the Michelin Performance and Responsibility Charter was published in 2003, ever since its creation, the development of our century-old Group has been based, at the personal behest of our founders, on certain values: concern for people, the best possible use of material resources, listening to our customers and observing facts.

Since 2002, the issues involved have grown in complexity, but the principles governing the approach are still relevant. These are set out in our Charter and constitute the fi ve fundamental values of the Michelin group:

Integrating the approach into the Company’s cultureMichelin was concerned about environmental and societal issues long before 2002. As early as 1992 we launched the Energy range, the fi rst generation of low fuel consumption

Acting for the long term: our Michelin Performance and Responsibility approach

The Michelin Performance and Responsibility Charter sets out the principles of our approach to Sustainable Development.

The ten themes of our approach

The scope of the sustainable development concept is constantly changing. The challenge is to anticipate and note the increasing relevance of a given theme. For example, ecosystems are without doubt a fundamental vision which complements the analysis of the relationships between the company and its environment. As such, it justifi es an assessment program and action.

Anticipating the emergence of real issues

13

Measuring progress madeIndicators – some qualitative, but most quantitative – are essential for monitoring progress. For each of our themes, indicators have been selected which allow progress to be tracked. But two elements really reveal the advances made since the approach started: widening of the scope of the themes and changes in the indicators.

In this way, the theme of industrial risks has broadened to encompass company risks, workplace safety is now covered by the quality of work environment, sustainable mobility has been extended to external road safety initiatives and the original themes have been generally enriched and subdivided. The indicators themselves have changed, depending on the results achieved. Counting the plants which have obtained their environmental certification no longer makes sense once this fi gure reaches 99.5% of tonnage produced. So the new MEF indicator Michelin sites Environmental Footprint, page 46 was created. The lost time injury frequency rate reached 1.85, placing us among the best global manufacturing companies. Therefore, in order to maintain progress in this area, we had to add another indicator page 40 . These evolutions in our way of defi ning and driving our work themes are the best proof of progress achieved.

Communicating and reportingSociety expects a lot from companies and our stakeholders are interested to fi nd out the results of our approach. Explaining

what we do and why is an integral part of the approach. First and foremost we do this for our employees, for whom this report is primarily intended. Our Shareholders also want to know what their company is doing in this area. The New Economic Regulations (NRE) section in our Annual Report complements this Michelin Performance and Responsibility Report, so as to provide more statistics and key information on the themes set out by the French legislator. Also, financial institutions increasingly compare companies depending on their approach to sustainable development and their results in this area. The SRI (Socially Responsible Investments) rating agencies set out classifi cations and indices, which can sometimes be diverging. Investors also conduct direct assessments of companies. This is why reporting is part of our approach.

The future of our Michelin Performance and Responsibility approach Following the dramatic downturn in the markets in late 2008 and with 2009 following the same pattern, the same question is asked time and again: “Will sustainable development approaches survive this crisis?” The answer can only be “yes” for one simple reason: the fundamental problems which have caused the notion of sustainable development to emerge have not been resolved; they are continuing and even getting worse. The solutions, often known but sometimes still to be developed, have not been implemented. And although all stakeholders are now focusing on short-term events, reductions in expenditures, to which companies must adapt, will perhaps slow down some

projects. At Michelin, the most fundamental work, that is at the very heart of the company strategy – related to tires – will continue to be pursued.

Respect of Customers,

one of the fi ve values of the approach, is a determining

factor of the growth for the Company.

Communicating our approach to 120,000 people around the world is a considerable task that we have taken on. Butwe also involve our employees in the initiatives themselves, like workplace and road safety, environmental certifi cation, diversity and community involvement.

In addition to the large-scale visibility of our approach, we seek results involving the people themselves through training and initiatives.

Employee involvement: visibility and results

The profi tability of a sustainable development approach cannot be calculated independently of the other results of a project or decision: the social and environmental impacts, the “extras” for customers or shareholders should be an integral part of a project and become indispensable to its success. It is crucial that a responsible and balanced development strategy contribute to the development of the company. If its contribution cannot be quantifi ed, it must at least be defi ned, otherwise its very justifi cation will be thrown into question.

Sustainability and profi tability

This document is primarily aimed at our employees, particularly those who are responsible for teams or projects. But this report is widely distributed to anyone who wishes to know more about our approach: customers, shareholders, investors, rating agencies, government departments, suppliers, industrial and commercial partners, international organizations, the press, students and the wider public on request. Some will read the report in detail, others will be more selective – but we hope everyone will fi nd it instructive!

Adapting to the wide range of readers


entire process through audit missions.

The approach is defined and coordinated by the Group Risk Manager. The Group Risks Committee, made up of the directors of the Product Lines and Group Services, meets three times a year and examines the most significant risks and the action plans – particularly continuity plans – designed to control them.

Thoroughly knowing and evaluating risksThe Group risk mapping is continuously updated by the entities in order to spot the emergence of new risks. A Group consolidation is carried out every year. Risks are classified according to eleven categories of causes (safety of people and goods, products and services, production continuity, accounting and finance, legal and fiscal, environmental, social, knowledge and expertise, fraud and ethics, IT, communication) and five categories of impacts in line with the Group’s fundamental values: customers, people, shareholders, environment, reputation. Every risk identified within an entity is evaluated in terms of likelihood of occurrence and seriousness of impact were the risk to materialize. Once the risks have been prioritized accordingly, control plans are developed.

Some external classifications stem from regulations, such as the Seveso III European directive, which aims to prevent major accidents on industrial sites storing dangerous substances and to limit their consequences on people and the environment. The directive establishes a classification based on the quantity

of these substances stored on-site. The importance of regulatory requirements for information and prevention ensues from this. At the end of 2008, of over 40 Michelin European sites, 2 were classified in the “upper tier” and 8 “in the lower tier”.

Controlling operational risksControl l ing operational r isks means guaranteeing the sustainability and continuity of the Group’s activities while ensuring the protection of its employees, assets and the surrounding environments. During the past two years, we have pursued the construction of continuity plans and the entities’ ability to deal with possible crises was enhanced by the progressive implementation of crisis management cells and by training through simulation exercises. Several dozen crisis cells have now been set up within the Group. They use documented procedures and specific means.

Controlling risks

Industrial operations Main risk factors Michelin action

Synthetic rubber production2 plants, Bassens in France and Louisville, Kentucky in the USA.

Inflammability of hydrocarbons used to synthesize rubber.Regular review of safety and site protection measures; ongoing significant investment programs to further enhance risk control and limit the consequences of an event.

Metal reinforcement productionProduction in 10 sites supplying all Group sites.

Accidental spillage from electrolytic bath used in metal reinforcement processing machinery.

Regular inspection of the facilities and processing of all effluents at waste water treatment plants.

Rubber mix productionProduction in 49 sites supplying all Group sites.

Accidentally occurring fire-prone situation. Pursuit at Group level of a program to equip all facilities with sprinkler devices and risk confinement through partitioning operations.

Textile reinforcement productionProduction in 3 sites.

Vapor and gas emitted while manufacturing adhesives. Installation of air treatment devices at every plant.

Deploying our Michelin Performance and Responsibility approach and controlling risks are two different but closely related sides of the same issue – putting into practice our fundamental values. In one case, it is about making progress in the way we simultaneously respect customers, people, shareholders, the environment and facts; in the other, it is about implementing methods and tools for consolidating progress, in a long-term perspective. Michelin believes that controlling risks is a key component in the execution of its responsibilities and relies on a strong culture and precise methodology in this area.

Three tiers of responsibility in coherenceAt Michelin, the responsibility and independence of judgment of players at three levels guarantee robust operational risks control:

and control for each entity (measures designed to prevent risks from materializing; measures designed to protect people, equipment and goods in order to moderate the consequences of the potential materialization of a risk; plans for business continuity in the case of a major malfunction), in compliance with Group standards;

and implementing prevention and protection standards and carrying out checks on their implementation;

Limited Industrial Hazards

15

Controlling the risk of fi reFire is the main industrial risk the Group is exposed to in its production process, as much during the production process as in the storing of raw materials and fi nished products, due to their fl ammable nature and the presence of numerous engines and motors which power our production equipment. However, the number of signifi cant fi re break-outs remains very limited across all the Group’s sites. For over fi ve years, there has been no fire or any other industrial accident causing significant damage to employees, Group or third party industrial assets, the environment or toward local residents.

Michelin has developed the High Protected Risk Michelin (HPRM) standard – its own set of standards for controlling the risk of fi re and major accidents. This concept rests on three pillars:

to prevent accidents from occurring;

arrangements to separate risks;

A central team of experts oversees a network of on-site operational correspondents to ensure the progressive application of this standard in existing facilities. The sites’ current condition and initiatives are assessed with regard to the HPRM standard, the areas identifi ed for improvement are prioritized and set

down in pluri-annual progress plans established by all industrial and logistics sites.

Moreover, all new projects (construction, renovation, extension, changes in production processes, etc.) are validated by an expert correspondent from the Environment and Prevention network who checks conformity of the project with regard to the HPRM standard. This global internal control approach uses the original EC-HPRM (Évaluation de Conformité – High Protected Risk Michelin) tool developed by the Group. Its use became part of regular activity on January 1, 2008.

Sharing feedback and best practicesFollowing the successful implementation since 2004 of the Michelin “SECURISTAT” system, a data collection and processing system for events information related to industrial risk management, the central service for fire prevention has set out an original approach for internal and external feedback, in order to analyze events and share findings throughout the Group.

In this area, note that Michelin originated an ambitious series of trials designed to improve and share technical knowledge on automatic protection by using sprinkler systems in tire warehouses and on the environmental impact of a tire fi re. These tests, which were carried out between 2001 and 2006 in the United States and France, were conducted in partnership with

the main tire manufacturers, logisticians and a specialist equipement manufacturer, under the aegis of the SNCP (Syndicat National du Caoutchouc et des Polymères, France). Findings led to improvements in fire protection of existing warehouses and efficiency assessments of new technology intended to equip future infrasctructure.

Fire extinction exercise using the resources of both our warehouse in Ennery (France) and that of local fi re fi ghters

Poster reminding employees of the fi re prevention measures to undertake during certain workshop operations


A company on the move and proud of its teams’ accomplishments: achievements and development areas for Michelin Performance and Responsibility 2007-2008

The Michelin group, world leader of the tire industry

Michelin is the world leader in the tire industry with a 17.1% share of the market (2007 data. 2008 data available August 2009)68 plants in 19 countries with 117,565 employees at the end of 2008 and net sales of 16.4 billion in 2008. -

2007 and 2008 investments amounted to over 1,200 million each year. Improvement in working capital requirements thanks to considerable progress in inventory management in 2007. Sales volumes in emerging countries up by 6%. At the half-way point in the Horizon 2010 plan, the Group was in line with its competitivity plan objectives ( 511 million in savings over 2007-2008).

-

Stage 1: Tire design, contribution to the progress of mobility Page 22

Launch of new tire ranges in all categories: Passenger car and light truck, Truck, Two wheel, Agricultural, Earthmover, Aircraft. 22-26

Research-Development-Industrialization (RDI) a strong engagement for the long term: 6,000 employees and a 500 million annual budget. 24

Implementation of the RDI transformation to accelerate and increase the power of innovation, Value to Design and Design to Cost approaches. 24

MICHELIN Energy Saver offers savings of 0.2 liters and 4g of CO2 per km and improves grip performance. 25

2007 Challenge Bibendum in Shanghai: the average CO2 emissions of passenger cars on show did not exceed 58 g/km.Creation of the MICHELIN Energy Endurance Challenge, an automobile competition integrating fuel consumption. 26

At the October 2008 Mondial de l’automobile event in Paris, two vehicles equipped with Active Wheel tires were displayed: the WILL from Heuliez and the Volage from Venturi. 27

Stage 2: Raw materials, Purchasing Page 28

103 pre-registration REACH files submitted by December 1, 2008. Elimination of aromatic oils for tires distributed in Europe at the end of 2009. 29

In 2008, out of 80% of our raw material purchases, 58% of our suppliers’ sites were ISO 14001 certified, more than in 2007. 31

Creation in 2007 of a college of agriculture for rural young people on our plantation in Bahia (Brazil). Launch of the Petits planteurs (small-scale growers) project in Nigeria. 33

The Purchasing group service transformation project, supported in particular by the Triangle program, was launched in late 2007 (103 projects). 33

In 2008, the US Carolinas Minority Supplier Development Council awarded Michelin the Supplier Diversity Advocate of the Year Award. 33

Stage 3: Tire manufacturing Page 34

Michelin Manufacturing Way (MMW) deployment continues. Of the 350 “good practices”, over 75% are in application in all our sites.250 people trained in Europe via the Quality Training Tour. 36

Deployment of management span of control optimization program for more operational efficiency and new opportunities for individual development.Individual Training Program (PIF) initiated for 80% of administrative employees, technicians and managers and to 100% of production workers. 38, 39

The lost time injury frequency rate drops to 1.85, the severity rate is 0.21 and the participation rate of staff members in prevention initiatives reached 52%. 40

The Second International Convention on Diversity was held in Clermont-Ferrand, in October 2008. 42

After ISO 14001 certification covering 99.5% of tonnage produced, the Environment Prevention Management System was deployed in almost 70% of our industrial sites at the end of 2008. 46

With the help of the pictograms presented on page 3, we identify for each area listed in this table which of our five values are particularly in play.

17

Assessing our results, communicating with our shareholders Page 74

2008 net sales represented 16,408 million (-2.7% compared with 2007), the operating margin reached 5.6% (9.8% in 2007), net income stood at 357 million (772 in 2007) and free cash-flow at -359 million (+443 in 2007). 75

Michelin listed in the SAM DJSI World and STOXX indices, and elected among the Global 100 Most Sustainable Corporations. 75

The Investor Relations annual prize was awarded to Michelin in 2007 by Nyse-Euronext and the SFAF; The Michelin Performance and Responsibility Report 2005-2006 received the 2007 prize for Best Sustainable Development Report, awarded by the Conseil National Supérieur de l’Ordre des Experts-Comptables (French National Superior Council of the Order of Certified Public Accountants).

75, 77

56% of Michelin employees in 55 countries subscribed to the third employee shareholding plan; Individual shareholders represented almost 15% of capital. 76

An average of over 250 meetings held with more than 750 investors in 20 countries. 77

In the United States, Michelin was named for the third time in 2008 one of the Best Employers For Workers Over 50 by the AARP (American Association of Retired Persons). 43

In 2008, Michelin Development contributed to the creation of 2,300 jobs in Europe and Canada. 44

In 2008, Michelin employees devoted more than 16,200 days to initiatives in favor of local communities and the Company provided external organizations with a total of 9.1 million. 45

At the end of 2008, compared with 2005, the MEF (Michelin sites Environmental Footprint) fell by 21.4%, including a reduction of energy consumption by 12.1% and of water consumption by 14.7% per metric ton of tires produced. 46

The Michelin plant in Ballymena, Northern Ireland, won two prizes in the 2008 Sustainable Ireland Awards, notably the Best recycling Initiative for its Zero Waste to Landfill project. 48

Stage 5: End-of-life recovery Page 70

Tire recovery rate is 91% in Europe, 88% in the United States and 87% in Japan. 72

Launch of a mechanism for sharing best practices among European end-of-life tire management companies. 72

An agreement was signed in France in February 2008 on the recovery of abandoned historic stockpiles. 72

New avenues for recovery are being developed: steel production, composite materials and synthetic lawns. 73

Participation in the international project group within the World Business Council National for Sustainable Development (WBCSD) with a view to share best practices and promote the implementation of recovery networks for end-of-life tires in new parts of the world. 73

Stage 4: Tire commercialization and use Page 52

Launch in 2007 of the MICHELIN Energy Saver passenger car tire and the MICHELIN X EnergyTM SaverGreen truck tire, both new benchmarks in terms of energy efficiency. 52

Deployment of Michelin Selling Way, referential of best marketing and sales practices within the Group, for better customer service efficiency and Michelin employees’ skill development. 54

Michelin awarded the Frost & Sullivan Customer Choice Award for Brand Offering 2007 in the “Safe and Durable Tires” and “Best Overall Tire Brand” categories. 59

300,000 vehicles equipped with Michelin Fleet Solutions in 21 countries. 62, 63

For the tenth time, Michelin has been ranked the highest in the original equipment customer satisfaction study by JD Power in the United States; the total number of such awards given to Michelin rises to 56. 69


Focus

Because we are aware of both the essential role and fragility of ecosystems, we have been carrying out preservation initiatives around several of our sites for a number of years, and have fully integrated this issue into our Michelin Performance and Responsibility approach.

Ecosystems in need of protectionEcosystems are dynamic sets of plant, animal, micro-organism communities and their non-living environment, interconnected by a cyclical flow of materials and energy. According to the Millennium Ecosystem Assessment, an in-depth study coordinated by the United Nations Environment Program (UNEP), human activity in the last 50 years has led to changes in ecosystems which have been greater and faster than during any other period of history, with a signifi cant and largely irreversible loss of biological diversity. Experts warn that for companies, the impairment of ecosystems will soon be an issue as important as that of climate change, which is one of its causes.

People need stably functioning ecosystems in order to survive – as do companies! They closely depend on them, whether for their natural resource requirements (wood, nourishment, plants, ore, water, etc.) or for their ecological regulation function (air, water and soil purification, pollination, etc.). However, companies are also among those directly or indirectly responsible for their degradation.

Protecting the primary forest in Bahia

Since 2003, Michelin has carried out work at the Bahia rubber plantation within the framework of the Ouro Verde (“Green Gold”) project to preserve primary Atlantic forest page 31 , badly threatened by deforestation. At the outset of the project, three plots of primary Atlantic forest, with a total surface area of 800 hectares offering exceptional biodiversity, were located on the plantation. We purchased an additional 550 ha plot and created 1,650 ha of ecological “corridors” linking the plots by planting native species between the rows of rubber trees. This environmental reserve now totals 3,000 ha. This operation is the world’s fi rst experience of species enrichment in a rubber plantation. As a result, an unbroken area of Atlantic Forest should be re-established within the next 20 years.

The reserve is managed by a team of scientists lead by a Doctor of Ecology and Evolution and has a 35,000-unit tree nursery created using the seeds from 100 different native species. It is an ideal observation ground for the scientifi c community as well as for visitors, who enjoy educational walking trails. The Biodiversity Study Center provides scientists from around the world with a huge open-air laboratory on the Atlantic Forest. The Center can host 29 researchers and is fully equipped for their work. Michelin contributes financially to some of the research work, including 36 studies into biodiversity which are currently underway.

The local community has not been forgotten: the Get to know the Atlantic Forest program aims to increase awareness of ecological issues among the local communities with guided tours of the reserve and excursions for local schools. Visitors can fi nd detailed information on the local ecosystem at the Michelin Center for Environmental Resources.

Acting to preserve ecosystems

Our research laboratory tree nursery on our plantation in Bahia

being degraded or used unsustainably (1).

lost (2). (3).

ened with extinction (1).

(4).

(1) Millennium Ecosystem Assessment – 2005.(2) FAO - 2001; 2006.(3) Moser et al. 1996(4) WWF Living Planet Report - ZSL - Global Footprint Network.

Impacts on ecosystems,some facts and fi gures:

In the United States, Michelin participates in the Wildlife And Industry Together (W.A.I.T.) program which encourages the adoption of measures for the protection of wildlife habitats on land owned by companies. Our testing center at Laurens received W.A.I.T certifi cation in

center and our Lexington, Sandy Springs and Starr plants.Employees volunteer to take part in initiatives like the creation of a “Carolina Fence”, a wooden fence typical of South Carolina which integrates local perennial botanical species and shelter for birds. Awareness initiatives on these subjects are carried out in neighboring schools.

The W.A.I.T. program in North America

The Michelin WAIT team in Lexington (US5), South Carolina

19

Focus

19

Focus

Our ambition to contribute to responsible development around this site is expressed by several directives:

barriers” (vegetation stabilizing the earth on embankments), canalizing rainwater to prevent erosion, filtration tanks directing rainwater toward the water table, planting over 300,000 trees and shrubs to avert erosion, ban on the construction of tracks on the protected zone;

test methods, research project with the aim of reducing emissions and waste;

Since its creation in 1973, fourteen years before the area was declared a natural park, the CEMA helped to preserve the unique environmental value of this arid, volcanic coastal landscape in southern Europe. It has succeeded in making the research and management activities proper to this industrial facility compatible with the conservation of the precious natural resources of its environment. It is a fi ne example of what we call responsible development. In addition to the agreement in place between Michelin and the Natural Park, we wishto develop other initiatives in the years to come:

to the establishment of new businesses.

Park and the Puys d’Auvergne Natural Park, both of which are volcanic in nature. This would complement Michelin’s contribution to the development of the region.”

Our experimentation center in Almería (CEMA, Centre d’Expérimentation Michelin d’Almeria) was set up in 1973 and occupies 4,500 hectares in southern Spain, of which 1,500 hectares are part of the Cabo de Gata-Nijar Natural Park. This park was created in 1987 and is located in a desert area with the lowest rainfall in Europe. It is home to very specifi c fl ora and fauna, including numerous species which are only found in this area. Since the CEMA was established, respect for the environment and integration into this special and unique setting have always been priority objectives. Our experimentation center received ISO 14001 certifi cation in 2005.

annual progress plans, undertaking studies on minimizing industrial waste, run-off water treatment and reuse for watering the tracks.

Our initiatives have allowed, for example, the preservation of a 500-year-old specimen of Dracaena Draco, a tree which originates in the Canary Islands and is located on our land.

Assessing the impact of ecosystems in the vicinity of our sitesIn order to assess the relations between ecosystems and our industrial activity, in 2008 in our Nyiregyhaza plant in Hungary we tested the ESR (Ecosystem Services Review) developed by the World Resources Institute, the World Business Council for Sustainable Development and the Meridian Institute. This method aims at identifying the risks and opportunities for companies regarding foreseeable changes in ecosystem balance. The assessment was carried out by a Michelin engineer who took part in the WBCSD Future Leaders Team program, with the help of a Group environment specialist and the support of the plant’s managers. This initial study demonstrated clearly and in a structured manner the link between ecosystems and the plant, particularly as regards air and water. Our aim is to progressively deploy the method on other sites.

Dracaena Draco SpecimenCEMA test tracks in Almeria

Rosa Mendoza, Conservation Director of the Cabo de Gata-Níjar Natural Park

“ The preservation of ecosystems will soon be as big an issue as climate change and CO2 emissions. At the WBCSD, it is one of our four major focus areas and companies have an important role to play. We think that ecosystems will soon be taken into account from an economic standpoint: in the future, companies will probably have to pay for every element they take from the environment and for the impact their activities are having on ecosystems, as a fi nancial compensation to preserve them. Michelin has been working on these issues for several years, particularly at the rubber plantation in Bahia. After taking part in our program to assess ecosystems, Michelin undertook one of the fi rst industrial “Ecosystem Services Reviews”, carried out in one of their plants in Hungary. We sincerely hope that despite the current crisis these steps will continue, as ecosystems are still under threat!”

Bjorn Stigson, President of the World Business Council for Sustainable Development

“


Tire designListen, anticipate, innovate

Raw materials, purchasingResponsible choices

Tire manufacturingQuality, safety, employee development, environmental control

Center

attentive to our Customers’ expectations

For further details see page 22

Michelin Performance and Responsibility a requirement at all stages in the tire’s life cycle

10,306 million purchases of raw materials, energy and services in 2008

Environmental impacts

They are mainly linked to the extraction of raw materials and the manufacturing of semi-fi nished products. Natural rubber production requires a cultivated surface area of around one million hectares in humid tropical areas and contributes to the fi xation of atmospheric carbon.

The impact on health and the environment of this stage is*:


4,606 million in salaries and social contributions(Michelin total headcount)


The environmental impacts linked to manufacturing are minor compared with those linked to other stages in the life cycle.



Technology Center

Tests

Attentive to the customer

Steel production

Oil industry

Chemical and textileindustries

Rubber plantations

Productionunit

*Evaluation in ecopoints, according to the life cycle analysis of a European passenger car tire (reference cycle 40,000 km) and that of a European truck tire (new, re-grooved, retreaded and re-grooved i.e. 4 lives, reference cycle 600,000 km)

21

4Tire commercialization and useProving performance

End-of-life recovery A promising future for end-of-life tires

16,408 million in net sales in 2008


A tire’s main environmental impact is linked to its rolling resistance, which accounts for up to 20% of a car’s fuel consumption and 30 to 40% in the case of trucks.



1.3 billion tires to be recovered every year throughout the world


End-of-life tires are recovered for retreading, use as fuel, manufacturing of rubber-based products, civil engineering work, etc. In Europe, disposal in landfi ll is now totally prohibited. In the United States it is forbidden in 41 States.



DistributionRetreading

Disposal

Energy recovery

Material recovery whole tires

Material recovery crumb rubber

Metal recycling

Road surfaces

Molded items

Sports and play areas


1ST

AGE Tire designListen, anticipate, innovate

Design is the fi rst stage of the tire’s life. Designing of a new tire is a blend of pure innovation, the results of our advanced research, and listening to our customers‘ needs, which we learn of via our marketing and technical studies department. It also requires anticipation: making available really innovative products, which transform markets and enable us to set the pace, is a long-term job. In addition,

it is essential to identify the performance areas which are important to customers, even if they do not spontaneously say so. A good example of this is the reduction in vehicle fuel consumption, the link of which with the tire is not immediately obvious. Finally through specifi c initiatives we contribute to progress in road mobility as a whole.

Michelin Research & Development: 6,000 employees and a 500 million annual budget Launch of program for transforming Research- Development-Industrialization processes, in order to halve development time for new product ranges and increase technical contribution and the power of innovation Launch of Value to Design and Design to Cost programs for tire technical performances at the right price

Launch of several new and innovative ranges: the MICHELIN X EnergyTM SaverGreen and MICHELIN X Multiway truck tires and the MICHELIN EnergySaver passenger car tire Creation of the Michelin Energy Endurance Challenge Contribution to road mobility by Challenge Bibendum. In 2007, in Shangai, passenger cars submitted to tests emitted an average of 58 g/km of CO2

Noteworthy facts 2007-2008

Tire design work at the Technology Center facility,

in Ladoux, France

Respect

for

Customers

Respect

for

PeopleResp

ect for

ShareholdersResp

ect for

the Environment

Respect

for

Facts

TIRE DESIGN

23

Attentive to our customers’ expectations

Users’ and vehicle manufacturers’ expectations

Our response in terms of tire performance and associated services

Our development areas

Improved safety

and road holding

and on all surfaces

and maintain a good level of performance on worn tires

The most economical tire in use fuel consumption

Travel comfort

at any speed

Improved respect for the environment

at end users

fuel consumption, CO2 and conventional pollutant emissions

consumption and CO2 emissions of the vehicle

for end-of-life tires

Products and services that facilitate mobility and Guides, ViaMichelin), assistance (Michelin OnWay), safety and

comfort (Michelin Lifestyle)

The main expectations of our customers and our development areas Passenger car and light truck market

Improved safety the tire’s entire lifespan: Michelin Durable Technologies solutions

Reduced cost per mile and improved vehicle productivity

services

resistance ranges;

ICHELIN brand

Improved respect for the environment

at end users

and mobility

and to the benefits of well-maintained tires: fuel savings and extended service life

environmental performance such as Michelin RemiX and Michelin Retread Technologies throughout the different lives of the tire casing

Truck market

Whether for personal or business trips, the transport of goods or people, for tourism, industrial or agricultural purposes, our customers’ expectations vary significantly. Users of truck tires pay great attention to the weight, volume, nature and packaging of loads, in addition to the distances involved and whether the kind of trip is on- or off-road. Requirements also differ depending on the region of the world: for passenger car users, Japanese drivers are particularly sensitive to comfort and noise levels inside cars; in North America, users appreciate all-season tires that can be used in summer and winter alike, while driving precision is a high expectation in Europe.

Even though these expectations may vary depending on customer segments, markets and regions, they nonetheless fall into five main categories:

through the tire’s grip on wet surfaces;

on the purchase price and durability of a tire, but also fuel costs related to energy efficiency and the ability to carry heavy loads, which determines the cost per ton transported;

applications (load, volume, etc.);

and fuel consumption);

and facilitate mobility.

Of these expectations, sustainable development issues are today taking on greater importance: energy efficiency, which brings savings and a reduced environmental impact, noise and safety. For several years, our awareness-raising and communication activities have reinforced this trend.


Didier Miraton, Managing Partner of Michelin

“There are currently around 800 million vehicles worldwide and this fi gure should double by 2030. Our ambition is to support this growth with no additional impact on the environment and no additional consumption of raw materials, while improving transport safety and pleasure.

This means:

halving tire rolling resistance so as to avoid generating a single additional gram of CO2;halving tires’ wear rate and making tires lighter so as not to consume a single additional gram of materials;reducing tire-road noise by at least 50% so as not to generate a single additional decibel;and make further progress in grip performances, particularly on wet surfaces and in cold conditions”.

Another progress area is for the marketing teams to work on determining the sources of value for customers inherent in the product: this is the Value to Design approach, which enables a customer requirement ranking to be included within the specifi cations.

Through these two approaches, the RDI department makesa signifi cant contribution to Group cost control objectives.

international and multi-disciplinary teams on tire materials, architecture and manufacturing processes. Their activity starts at a very early stage, focusing on fundamental questions of physics and chemistry, and also, further down the line, includes industrialization of the prototypes that are designed.

The transformation of our RDIThe Michelin RDI (Research, Development, Industrialization) process has undergone a very important change over the last two years. During this period, the effort of RDI has become fi rmly established around the requirements of its two customers: the market, whose expectations it must meet by offering ever more innovative products, and the Michelin production sites, to which it must provide product ranges enabling production costs to be optimized.

This latter process of Design to Cost is based on approaches which allow plant spending reductions without compromising the performance of the fi nished product and therefore customer satisfaction. To reach this goal, our researchers associate industrial and process experts as well as purchasing specialists. The fi rst results were achieved, for example, by reducing design complexity and the number of semi-fi nished products. Likewise, by demanding improved performance with less material mass, we become less vulnerable to changes in the cost of raw materials. Ultimately, this approach must start very early on, at the initial conception stage, so that we may be able to explore as many cost savings avenues as possible.

Our Research & Development activity, supported by test resources on four continents and a research budget above the industry average for many years, has initiated technological breakthroughs that have marked the early and recent history of the tire.

In 2008, a 500 million budget was allocated to this activity, carried out in France, the United States and Japan, as well as Brazil, Spain, China and Thailand. Our 6,000 employees are located in the heart of all our main markets and work within

The power of innovation, key to our leadership

Low rollingresistanceMICHELIN Energy tirefor passenger cars

924% less fuelconsumptioncompared tothe tiresreplaced

Low rollingresistanceMICHELIN Energy tirefor trucks

956% less fuelconsumptioncompared to the tiresreplaced

MICHELIN X One truck tire

01Replaces dualmount tires:savings inmaterial,space and fuelconsumption

MICHELIN Anti-splashtruck tire

02Divides theheight of waterprojections inrainy conditions by four

MichelinDurableTechnologies

05Gripregeneratedduring wear,up to 50%increaseddurability;increased loadcapacity

MICHELIN Pilot power 2CT tire for motorbikes

06Improvedsafety due to2 CompoundTechnology

MICHELIN MultiBibAgricultural tire

06Lasts 35%longercompared tothe previousrange

MICHELIN Energy Saver tire for passenger cars

07Less:- fuel consumption(0.2l/100km)

- CO2 emissions

(4 g/km) more:+ durability+ safety

MICHELIN Omnibib 70 seriesAgricultural tire

08Wider footprint = time and fuel savings; 14% greater load compared with standard range

MICHELIN Anakee2 for Trail motorbikes

0829% morelongevity with the same wet grip thanks to the technology “Silica”, outcome of Competition

MICHELIN X EnergyTM SaverGreen for trucks

08Front axle load bearing capacity up by 500 kg.Lower fuel consumption (0.4l per 100km) i.e. an annual reduction of 520 litres per vehicle

MICHELIN X MultiWay for trucks

08+ greater

productivity+ 30% more

mileage+ more safety+ 20% more

motricity when two-thirds worn

Michelin innovation in the service of mobility, a few key dates

After over a century of success in motorsport, Michelin decided

a single tire supplier went against our philosophy: for Michelin, competition is where the technical performance of our products challenge that of our competitors. We therefore chose to move our efforts into other categories and in 2008 we started the Michelin Energy Endurance Challenge which rewards the best performing teams in energy effi ciency in the Endurance Competition discipline (Le Mans 24 Hour race and Le Mans Series). At each race, the best performing team is the one that achieves the best average speed/energy consumption ratio, thereby linking the performance of the car with aerodynamics, the tires, drive skills and team organization.

New competition: endurance and low energy consumption

TIRE DESIGN

25

Adjusting fundamental balancesThe global performance of a tire is the result of a balance between distinct but related criteria. It is our research engineers’ mission to achieve different balances using innovative architecture solutions and new materials in order to improve overall performance. Only highly technological content will resolve dilemmas between confl icting performances.

Key performancesOf the numerous performances of a tire, four play a key role in terms of Sustainable Development:

The more energy effi cient a tire, the less energy it aborbs during its use. In 1992, Michelin made a crucial step in the development of more energy effi cient tires with lower rolling resistance by changing the chemical composition of passenger car tire rubber compounds. Today, the fourth generation MICHELIN Energy Saver tire brings about additional savings of 0.2 l / 100 km and 4 grams of CO2 per km.

Knowledge of tire wear mechanisms is crucial in terms of durability. Thanks to innovation in design and materials, as well as an improved understanding of the laws governing

tire behavior, we have been able to make progress and reach outstanding durability, without compromising safety. Improved longevity optimizes energy use and raw materials consumed during tire manufacturing, leading to improved environmental results. Our research shows that with developments in new technology, we can envisage a 50% increase in the lifespan of truck tires in the next ten years.

In Europe, noise reduction objectives, particularly in urban areas, have become more stringent – refl ecting the society’s serious consideration of this impact of road mobility. Compared to current values, noise reductions of around 2 to 5 dB need to be made for passenger car tires, and 3 dB for truck tires. When addressing noise issues, numerous parameters come into play: resulting from tire-road contact, external noise depends on the tire itself, the road surface, the vehicle, as well as the speed of the vehicle and road layout. To reduce noise levels, Michelin is working on the parameters over which it has control – the nature of the materials, internal tire architecture and tread pattern design.

Grip and handling are areas of performance which we cannot compromise on: the safety of vehicle passengers and other road users depends on them, whatever the driving conditions. The weather, for example, has a major infl uence on grip: a vehicle traveling at 60 km per hour that needs 12 meters to stop in dry conditions, needs 24 meters in the wet, 48 meters in snow and 96 meters on an ice-covered road!

Electrically-powered engines, a new challengeWe fi rmly believe that tomorrow’s vehicles will have to reduce road transport’s dependence on oil and its share in CO2

emissions. We believe that electric engines, 100% or hybrid, will see widespread development. Energy consumption will have to be as low as possible so that the car can provide acceptable levels of autonomy.

We are already preparing for the consequences that these changes will have on tires. The tire’s contribution to reduce vehicles’ energy consumption, increase safety and to lower noise levels will be even more decisive than today. Preparing for the introduction to the market of these vehicles and defi ning the characteristics of the tires to equip them is a new working ground for our research engineers. Sustainable development and its environmental objectives are an opportunity for our research teams to reach their full potential and really stand out.

The responsible performance of tires

Electrically powered SmartWet surface test tracks at Ladoux, France Adherence in all circumstances guarantees security.


the average CO2 emissions of all the vehicles present, including electric vehicles and trucks, did not exceed 110 g/km, a value lower than the European objectives for 2012. Passenger car vehicles alone, because of the increasing presence of electrically-powered engines, did not exceed 58 g/km on average!

Scores of meetings and round table discussions enabled participants from the international community to evoke the avenues opened up by technology. The experts evaluated solutions which exist now on such topics as the advances in battery power, the reduction in road traffi c congestion in urban areas or lessening dependence on oil, to make mobility more sustainable. The next Challenge Bibendum, initially planned for April 2009 in Rio de Janeiro (Brazil), has been postponed until June 2010 due to the global economic crisis.

will by their very nature considerably improve conditions on the European market, in the interests of the customer and society as a whole. Estimated annual fuel savings are of the order of 8 billion euros in Europe (base 2012) for transport companies and private car owners.

In late 2007, the US Congress approved an Energy Bill which required that the NHTSA (National Highway Traffic Safety Administration) define within two years tire information for communication to the consumer. Manufacturing companies will then have three years to gradually make this information available.

Finally, regulation on materials is getting tighter with REACH page 29 and the GHS (Global Harmonised System) Project.

Challenge Bibendum in 2007 and 2010

The ninth Challenge Bibendum was held from November 14 to 17, 2007 in Shanghai. 3,500 participants and guests gathered in the city which will host the Universal Exhibition in 2010. The primary objective of the event was to demonstrate in action state-of-the-art “clean and safe” road vehicles. The 70 vehicles on display at the event were subject to a range of technical measurements while on a track, then on a 70 km-long road route. A wide variety of vehicles were represented, from buses, traditionally-fueled vehicles and two-wheelers to electric, hybrid and fuel cell-powered cars. Significantly,

In addition to bringing out new tire ranges which modify vehicle performances, Michelin wants to make advances in all areas of road mobility, by contributing to the defi nition of the technical conditions governing its practice and by acting as a catalyst for progress, through participation in in-depth discussions over the long term.

Contributing to standards and regulationsMichelin is continuously involved with authorities as well as professional associations of the tire industry (RMA, TRA JATMA, ETRMA, ETRTO), standardization organizations (ISO), regulatory organizations (UNECE), and vehicles manufacturers associations. In 2007-2008, Michelin followed with interest regulation projects related to tires which aimed to better satisfy consumer and societal expectations in the areas of fuel consumption, CO2 emissions, grip and noise.

The European Union set up the regulatory project 2008/316, still to be approved by the Council of Ministers as of end 2008, defi ning minimum requirements for rolling resistance, wet grip and external road noise. The regulations will also require that new vehicles be equipped with a tire pressure monitoring system. The regulatory project 2008/779, currently being drafted, will defi ne all information to be communicated to the customer through labeling, thereby encouraging better choice when purchasing new tires. Such regulations, supported by Michelin,

Mr. Wan Gang, Chinese Minister for Science and Technology,at the wheel (2007 Shanghai Challenge Bibendum)

The Mobility for Development report,

published in May 2009The World Business Council for Sustainable Development

associates about 200 world-ranking companies, representing

organizes the cooperative work to be carried out by its members. The goal is to identify progress avenues so as to concretely put into practice a more sustainable pattern of development, which is acceptable over the long term to people and the planet. Michelin has been a member since 2001 and is particularly involved in discussions linked to mobility – the from 2001 to 2004, the Mobility for Development in 2007-2008 – and also in discussions on global issues – the , as well as Energy and Climate in 2008.

Our participation in the WBCSD

Working together to advance road mobility

27

FocusFocus

of a second to adapt the position of the wheel and the chassis. Noiseless, with exemplary road handling and comfort, space effi cient, the Active Wheel system is above all environ-mentally friendly. As it is electrically powered, it does not generate any local emissions. Electricity can be stored in a battery or produced by a fuel cell or any other generator. Of course, the impact of producing electrical energy has to be included when assessing the overall impact of the wheel and this varies greatly depending on the production system employed. Finally, in a very environmentally-friendly package, Active Wheel is the optimal integration of four functions: engine, suspension, braking and tires.

A world fi rst in ParisIn October 2008, at the Mondial de l’Automobile in Paris, two vehicles equipped with MICHELIN Active Wheel – the WILL from Heuliez and the Volage from Venturi – were displayed.

The Volage is the result of a partnership between Venturi Automobiles and Michelin. It has 4 drive wheels and uses the most advanced technology available to electric vehicles. Capable of accelerating from 0 to 100 km/h in less than fi ve seconds, this two-seater with four Active Wheels is the symbol of passion for automobiles… in this case electric!

Resulting from the collaboration between Heuliez, the world’s top manufacturer of electrical vehicles, Michelin and Orange, the WILL has 5 seats and is 3.74 m long. Depending on the type of battery, it has a maximum driving range of 150 km to 400 km and top speed of 140 km/h.

Tire + wheel = TweelAnother example of innovation in progress, Michelin is working on an original kind of wheel which does not rest on a casing fi lled with air, but on stretchable netting made of composite materials. This innovation has been named “Tweel”, from “tire” and “wheel”. MICHELIN Tweel wheels offer major advantages: they do not puncture, they are impervious to poor infl ation and they have excellent lateral rigidity. Tweels are ideal for use over harsh terrain, including construction and military applications and also space exploration. The MICHELIN Tweel concept has therefore been reserved for future use by NASA to equip several lunar rover vehicles. Its grip performance, even at very low temperatures, combined with its high payload capacity, make it three times more efficient than the original Apollo lunar rover wheels.

Technological innovation: original contributions beyond the tire

The lunar rover wheel was tested on a volcano slope in conditions close

to those on the Moon and on Mars.

Because of its fl exible spokes, the MICHELIN Tweel is perfectly suited for off-road use.

The Venturi Volage

Technological innovation will play a major role in making road mobility more sustainable. In addition to new tire ran-ges, Michelin is working on propulsion systems and energy sources. Over and above discussions, we wish to contribute in a factual manner to more sustainable mobility.

In October 2004, at the Challenge Bibendum in Shanghai, we exhibited a prototype vehicle designed and manufactured by Michelin, in partnership with the Paul Scherrer Institut: the Hy-Light, an electric fuel cell-powered car, with a maximum driving range of 350 km and a top speed of 130 km/h.

In 2007, the Hy-Light 2 improved on these performances, with a travel range of 450 km and a maximum speed of 145 km/h. That same year, Michelin also exhibited the EV-Light which features a Li-ion battery pack, with a 45 kWh power output, a maximum driving range of 300 km, a total mass of under 900 kg and which carries up to 4 passengers page 11 .

Convinced that the future of road travel will see an increasein electric propulsion, Michelin has invested in two high value components: MICHELIN Active Wheel and the fuel cell.

Two electric engines in each wheelMICHELIN Active Wheel houses two engines. One is used to provide traction for the vehicle, delivering 30 kW of out-put power for a weight of only 7 kg and stores the kinetic energy generated by braking. The second engine ensures the suspension function: its actuators only need 3/1,000ths

The WILL from Heuliez

A fuel cell produces electricity by combining oxygen and hydrogen, with pure water as its sole waste product. Michelin has been working for several years on such devices to power road vehicles. More recently, our research teams succeeded in designing a fuel cell capable of powering the back-up electric power systems of an Airbus A320. During a real condition experiment, which took place in early 2008, the fuel cell generated up to 20 kW of electricity and provided power for the aircraft’s back-up hydraulic circuit pump. Its robustness was confi rmed at high acceleration and zero gravity. This success rewards the partnership

them to further develop ways to implement fuel cell technology for replacing other airborne systems such as emergency power systems and auxiliary power units.

A Michelin fuel cell tested on an Airbus A320


2ST

AGE Raw materials, PurchasingResponsible choices

The production of raw materials and components, the second stage of the tire’s life, accounts for only a small proportion of the overall environmental impacts identifi ed in the life cycle analysis. It is however a crucial stage because the nature of components selected plays a signifi cant role in the tire’s fi nal performance, in its manufacturing conditions and in the consequences of its use on the environment. The quality

of the relations we build withour suppliers in our Purchasingactivity determines the desired triggering effect in favor of a more widespread implementation of sustainable development principles. Integrating criteria related to the respect of our fi ve values into our purchasing referentials helps us better control our risks and fosters the development of responsible, lasting relations with our suppliers.

Pursuit of work to eliminate aromatic oils 103 pre-registration REACH fi les submitted by December 1, 2008 Launch of the Smallholders project in Nigeria Creation in 2007 of a college of agriculture for rural young people on our plantation in Bahia (Brazil)

Launch of the Michelin Purchasing University in 2008 New internal control procedures for Purchasing

In our chemistry laboratories, we develop the components which

we produce or purchase and which play a major role

in our tires’ performance.

Respect

for

Customers

Respect

for

PeopleResp

ect for

ShareholdersResp

ect for

the Environment

Respect

for

Facts


RAW MATERIALS, PURCHASING

29

The selection of components,a strategic challengeThe fi nal performance and manufacturing processability of tires are greatly dependent on the judicious choice and reliable quality of components. In 2008, raw material purchases represented some 45% of the Group’s purchases in value, an amount that progressed by 9% compared to 2006 due to the rise in price of the main components of tires.

Five main families of raw materialsOur tires are made up of over 200 components, which can be broken down into fi ve main families:

ponent of passenger car tire treads;

to improve resistance to wear and, in the case of silica,energy effi ciency;

provide robustness;

Pursuing the elimination of aromatic oils

In 2007 and 2008, Michelin pursued its commitment to eliminating aromatic oils from all its products, in conformity with the European Directive 2005/69/CE, which prohibits the utilization of aromatic oils, by implementing actions by Product Line and by Geographical Zone.

By January 2010, all tires manufactured in or imported into Europe will be free of aromatic oils. Michelin aims to extend this requirement to all the products it manufactures, including outside Europe.

Selecting the best raw materials

waxes, vulcanization accelerators, etc., which endow the tire with a range of specifi c properties.

REACH: 103 fi les already submittedThe European regulation on the Registration, Evaluation, Authorization and restriction of CHemicals (REACH) came into effect on June 1, 2007. Its main aim is to improve the protection of human health and the environment regarding the potential risks of some 30,000 chemical substances. REACH entrusts industry with the responsibility of assessing and managing such risks and of providing users with adequate safety information. In compliance with requirements, Michelin submitted pre-registration fi les for each relevant substance (103 fi les submitted by December 1, 2008) within the agreed deadlines. Registration fi les must now be prepared by carrying out an environmental and sanitary assessment of the chemicals used in the manufacture of tires. Michelin also works closely with its suppliers affected by REACH to ensure that they are all capable of meeting the statutory deadlines and control our own risks when faced with decisions on component substitution.

After eliminating aromatic oils from tires distributed in Europe, by the end of 2010 extend this measure to the other markets where the Group is present.

Progress objective

Natural rubber 31% Synthetic rubber 25% Reinforcing fi llers 16% Chemicals 13% Steelcord 9% Textile fabric 6%

Michelin’s consumption of raw materials in 2008(in value)

Rubber mix processingSteel cord


This direct presence in rubber cultivation is significant because, while it only accounts for 11% of our consumption of natural rubber, it enables us to maintain our technical expertise and to experiment innovative agricultural practices, thereby contributing to the spread of sustainable rubber cultivation.

The agroforestry principle experimented on our Brazilian plantation in Bahia, for example, entails combining rubber cultivation with banana and cocoa crops on the same plot of land. This approach, applied to the 12 plots of the plantation and integrated in the agricultural farming program implemented by Michelin in this region (in which over 1,500 families participate), provides growers with a more regular income. Since the launch of the project in 2005, 2,550 hectares of rubber trees and 2,000 hectares of cocoa have been planted.

one worker for 3 to 5 hectares. In this way it provides rural employment for nearly 6 million people around the world and provides a livelihood for 20 million. On an environmental level, rubber plantations absorb atmospheric CO2 and thereby help mitigate climate change. According to a carbon footprint survey carried out by the Université Catholique de Louvain in collaboration with Michelin, rubber tree plantations absorb the equivalent of 8 metric tons of CO2 per hectare and per year. In this way they give rise to carbon credits under the Clean Development Mechanism (CDM) defined by the Kyoto Protocol. Moreover, like all forest crops, they contribute to preserving soil and ecosystems.

Michelin, a major player in rubber cultivationMichelin is first and foremost active as a purchaser of natural rubber, which represents approximately half of its total consumption of elastomers and nearly 10% of the world’s production.

Michelin is also historically present in rubber cultivation through its two rubber tree plantations in Brazil and its 20% holding in the SIPH (Société Internationale de Plantations d’Hévéas) which owns subsidiaries in several African countries: SAPH (Société Africaine de Plantations d’Hévéas, Ivory Coast, six plantations), GREL (Ghana Rubber Estate Limited, Ghana, one plantation), PGN (Plantation Group Nigeria, four Nigerian plantations formerly owned by the Group and transferred in September 2006 to the SIPH) and CRC (Cavalla Rubber Corporation, Liberia, one plantation).

Nearly 70% of the world’s production of natural rubber is consumed by the tire industry. The exceptional physical properties of natural rubber, in particular its excellent thermal aging resistance, make it practically irreplaceable in some of our products, particularly truck and earthmover tires. This renewable natural resource produced by rubber cultivation is however subject to substantial price fluctuations and a growing demand that could threaten the continued availability of supplies.

Predominance of small-scale growers Over 80% of the world’s production of natural rubber is grown by smallholders on plots of land ranging from 0.5 to 3 hectares. Indonesia and Thailand are the largest producers, totaling nearly 60% of the world’s production. In all, rubber plantations cover some 10 million hectares of our planet, producing an estimated 10 million metric tons of natural rubber per year. Michelin does not purchase its natural rubber directly from growers, but gets most of its supplies in Asia from production plants which process the latex provided by smallholders. Asia accounts for more than 94% of the global production of natural rubber.

An exemplary development toolThe economic, social and environmental benefits of rubber cultivation make it an intrinsically highly sustainable crop. Compared to other crops such as eucalyptus, rubber cultivation requires large quantities of labor in the fields, approximately

Promoting sustainable rubber cultivation

Global consumption of elastomers(in thousands of metric tons)

30,000

25,000

20,000

15,000

5,000

02000 2007 2009 2015 2018

Synthetic rubber Natural rubber

2005 2008 2010

10,000 Asia 94.9% Africa 4.1% South America 1.0%

Production of natural rubber in 2008IRSG data

Progression of natural rubber prices

RSS 3 (1) TSR 20 (2)

(1) Rubber smoked sheet 3 (2)Technically specified rubber 20

350

250

200

150

50

090 92 94 96 9791 93 95

100

98 99 00 01 02 03 03 04 05 06 07 08 09

300


31

La maison agricole familiale à BahiaSupporting agronomic researchMichelin has established partnerships with several research bodies to contribute to scientifi c progress in the fi eld of rubber cultivation. This collaboration has in particular enabled us to fi ght more effectively against Microcyclus Uleï, a fungus that attacks the leaves of rubber trees in South America and could spread to plantations in Asia and Africa. In collaboration with the CIRAD, French Agricultural Research Center for International Development, the Group is in particular working on the development of varieties capable of resisting the fungus. This research also enables selection and reproduction of varieties of rubber trees adapted to different climatic conditions and to improve productivity.

Protecting the biodiversity in rain forestsLocated on the Brazilian coast, the Bahia plantation encompasses 1,350 hectares of primary Atlantic forest, one of the most endangered rainforests on the planet. In the framework of the Ouro Verde project, Michelin has recreated an ecological reserve for use by the scientifi c community. Michelin also carries out initiatives that seek to raise ecological awareness within the regional community page 18 .

Controlling working conditions

On our own Brazilian plantations, we scrupulously comply with local and international regulations relating to labor law and working conditions.

In Africa, the SIPH is committed to ensuring that working conditions on rubber tree plantations meet the principles of the International Labor Organization (ILO). Welfare programs are also being deployed. For example, in the Ivory Coast plantations, the SAPH has signed a charter to fi ght against AIDS, which includes the confi dential screening of voluntary employees and neighboring populations, the prevention of mother-to-child transmission and free access to tritherapy treatment for people found to be HIV positive. A malaria prevention program will be launched in 2009.

All our suppliers of natural rubber in Africa and Southeast Asia undergo regular audits to monitor working conditions in plants (yearly in the case of large plants and at least once every two years for smaller operations). Non-compliance with the Group’s standards can lead to a suspension of contract and to cancellation in the case of repeated breaches.

July 17, 2008: inauguration of the Smallholders project on the Nigerian plantation of Araromi, in the presence of small-scale growers, government and local community representatives and Michelin and SIPH teams.

The college of agriculture for rural young people in Bahia,Brazil

a project to promote the plantation of rubber trees in Nigeria by encouraging the development of village plantations.

families a population of 2,700.

Michelin fi nances the purchase of the seedlings and fertilizers

This “win-win” project is acclaimed by local authorities.

Smallholders program: a concrete illustration of our approach in Nigeria

is comprised of very small and uneven plots, which are diffi cult to farm on an industrial scale. The plantation is nonetheless a major source of income for the local communities of Igrapiúna and Ituberá, home to more than 40,000 people. In a context of insuffi cient productivity and profi tability, Michelin, conscious of its responsibilities, sought to preserve local jobs and safeguard the primary forest.

Ouro Verde project, which entailed selling 400-hectare plots of land to twelve Brazilian managers of the plantation, helping them obtain reduced-rate loans and providing them with a commitment to purchase their latex production. The on-site Michelin latex transformation plant remains in operation, as does the research unit that supplies the regional producers and smallholders in more resistant and productive seedlings at cost price. In parallel, Michelin is creating a 3,000-hectare ecological reserve and is pursuing its research on Microcyclus Uleï. Hand in hand with local authorities, Michelin has also launched a program around family agriculture, built new homes, fi nanced two schools and a family clinic. In 2007, the creation of a college of agriculture for rural young people enabled

work on the plantation. Thanks to this project, jobs on the

An independent review of the project was carried out by the International Labor Offi ce (ILO) in 2007. Its results concluded that the project had made it possible to maintain existing jobs, create new ones and preserve the workers’ benefi ts and rights.

Bahia: an exemplary model for responsible development


of our purchases of raw materials, 58% of our suppliers’ sites were ISO 14001 certifi ed, increasing compared to 2007.sites where they intervene;

health and safety and on that of the communities living in the vicinity of their facilities.

The Purchasing Code is complemented by a guide to the Rules of ethics in relationships with suppliers defining the conduct of the Group’s purchasers. Our purchasers must make our suppliers, as well as any Michelin employee involved in the purchasing process, aware of this guide. These documents are available from the www.michelin.com/purchasing website.

Assessing suppliers’ overall performanceIn 2007-2008, the deployment of the Michelin Performance and Responsibility approach to Purchasing was pursued with the progressive incorporation of contractual clauses fromthe Michelin Purchasing Code. These clauses are today partof assessment questionnaires and internal and externalsupplier audit referentials.

In the case of raw material suppliers, a “maturity scale” has been compiled to assess overall performance in terms of sustainable development, which is then discussed during feedback meetings. This scale includes criteria relating to the environment, social legislation, ethics and corruption. In this way, we found for example that in 2008, for a volume corresponding to 80%

We wish to assume responsibilities that extend beyond the gates of our plants, which means working with companies that are committed to progressing on economic and technical, but also social and environmental issues.

Relations governed by the Michelin Purchasing Code

Considering the signifi cant weight of our purchases, which account for 63% of our sales, and our requirements in terms of quality and reliability of products, we naturally pay special attention to our supplier relations, and even more so since we implemented our Sustainable Development approach. Since 2004, the Michelin Purchasing Code’s aim has been to ensure that the values expressed in the Michelin Performance and Responsibility Charter were put into practice in our relations with suppliers, when purchasing services, capital goods and raw materials. This document specifi es our selection criteria and the principles with which our suppliers must comply:

the countries where the suppliers operate;

Labor Organization (ILO), in particular if local legislative pro-visions are less demanding than those of the ILO, notably in the case of child and forced labor, respect for minorities and working conditions;

Selecting committed suppliers

In addition to the drawing up of maturity scales, 30 to 40 yearly audits of our suppliers are conducted by our teams. During these visits, Michelin systematically makes recommendations concerning safety at the workplace and ergonomics. In this way, we satisfy a demand on the part of our suppliers, who consider us the company that aides them the most in progressing these aspects and judges our attitude positively. This approach is reinforced in the case of suppliers based in developing countries, in which our purchases are growing substantially. Michelin pays them special attention and organizes regular visits.

Audits of our suppliers

Europe 57% North America 30% South America 5% Asia 8%

Breakdown of our purchases of goods and services by geographical zone (in value, 2008 fi gures)

Raw materials(other than natural rubber) 30% Natural rubber 15% Energy 5% Machine purchases 10% Maintenance equipment 8% Services 29% Information systems 3%

Breakdown of our purchases of goods and services* (in value, 2008 fi gures)

* excluding fi nished goods

The Michelin Purchasing Code


33

Preventing the risk of fraudA new project was launched in 2008 to ensure that our ethical principles were duly applied in relations with suppliers.

The rules of ethics with which all involved in purchasing must comply have been clearly formalized: systematic competitive tendering, clearly defi ned specifi cations, guidelines to be respected by the purchaser in the relations with potential suppliers, etc.

An internal purchasing control system entrusted withidentifying and eliminating the risks of fraud has been set up at the level of central purchasing and in Europe. It completes the systematic risk analysis approach carried out by the Internal Audit department.

Reinforcing purchasers’ awarenessIn 2008, the Michelin Performance and Responsibility team addressed the Purchasing department management committee. This reinforced purchasers’ awareness regarding the implemen-tation of the Michelin Performance and Responsibility approach in supplier relations.

Supporting suppliers from developing countriesThe changing global industrial landscape means that a growing proportion of our purchases comes from developing countries.

In these countries, compliance with the Michelin Performance and Responsibility Charter values implies increased vigilance, guided by supplier quality assurance. We systematically visit the facilities of all suppliers from developing countries. If environmental practices or working conditions fail to comply with our expectations, the supplier is not selected. During these assessments, our role is not only to monitor, but also to develop progress plans with our suppliers.

In Asia, for example, we are particularly attentive to issues such as child labor and any breach would result in the immediate termination of commercial relations. We also seek to ensure that our Purchasing teams understand and respect the specifi c aspects of local cultures.

Greg Stephens, Director of Supplier Diversity in the Purchasing department, receives the 2008 Supplier Diversity Advocate of the Year award presented to Michelin in the United States of America.

Train all Purchasing teams, some 300 people, from 2008 to 2011 at the Michelin Purchasing University, internal training program specifi c to the Purchasing activity

Develop partnerships with our strategic suppliers

Deploy a communication campaign about rules on conduct and ethics

Progress objectives

Our purchases of goods and services represented over 10.3 billion in 2008, an amount that grants the purchasing

value creation objectives, an 18-month transformation plan was launched in 2007. In 2008, the plan notably resulted in a company-wide drive to reinforce the professionalism of purchasing teams, implement market reviews, deploy the Triangle method (our purchasing process optimization program involving the buyer, the internal customer and the expert who defi nes the purchasing specifi cation) and conducts closer supervision of our Suppliers’

We are pursuing prevention approaches initiated with temporary employment agencies. An action plan has been established and the following actions have been deployed:

temporary employment company;

with local agencies on each site;

partnership with local agencies;

employment companies.

With temporary employment agencies

In an effort to contribute to the development of local economies, Michelin has implemented a supplier diversity program in North America to encourage purchases from small fi rms run by women or minorities. Overall quantifi ed objectives are defi ned yearly and specifi c support is offered in the form of technical and administrative advice to help these small fi rms effi ciently make tenders in their fi elds of expertise. In 2008, the Carolinas Minority Supplier Development Council applauded Michelin’s commitment by awarding the Company the “Carolina MSDC Dorothy Brothers Supplier Diversity Advocate of the Year Trophy.”

in favor of supplier diversity


3ST

AGE

Tire manufacturingQuality, safety, development of people, environmental control

Manufacturing is the third stage of the tire’s life. The tire becomes a reality. It acquires its qualities over a complex process that entails the scrupulous control of numerous parameters. The majority of the Group’s employees is dedicated to this industrial phase. From manufacturers of semi-fi nished products, tire builders, quality inspectors and machine specialists to process developers, environmental experts, safety managers and

planners, it would be impossible to list all the professions whose high level of expertise is a prerequisite to achieving the result sought after: producing the tires our customers require, with the same quality level wherever they are manufactured, while permanently seeking to reduce our consumption of resources and environmental impacts and establishing quality relations with the communities around our sites.

Lost time injury frequency rate falls to 1.85 Over 75% of our Michelin Manufacturing Way “good practices” applied throughout the Group Training access rate (number of hours of training divided by the number of hours worked) reaches 4.2%

A sudden and dramatic drop in production at the end of 2008 after years of growth Environmental performance measured by the MEF indicator exceeds the - 20% objective compared to 2005

Retreading workshop, Querataro Mexico plant

Respect

for

Customers

Respect

for

PeopleResp

ect for

ShareholdersResp

ect for

the Environment

Respect

for

Facts


TIRE MANUFACTURING

35

During this stage the five values of our Michelin Performance and Responsibility approach take on all their meaning and find room for expression in many areas. After a reminder of the fundamentals of our industrial strategy, we shall present progress made in the areas of sharing best practices, development of people, safety and health at the workplace, diversity, relations with communities and government bodies, and environmental impact. We shall examine in particular the example of our Homburg plant in Germany.

Our industrial strategy is globalThe efficiency of our industrial tool – 68 plants in activity in 19 countries at the end of 2008 – and our geographical location close to our markets are the two key elements that support our worldwide strategy.

The tire market is bound to that of road transport and coincides with the expansion zones of cars and trucks: it is currently experiencing rapid development in Eastern European, South America and Asia.

Each territory has its own specific needs: straight highways which stretch for thousands of miles in the United States, shorter distances and more winding roads in Western Europe, budding infrastructures in certain Asian countries, while others are already driving ahead at full speed.

To meet the specific needs of each of these markets, Michelin’s industrial geographical development has followed

Adapting to the late 2008 market downturnAt the end of 2008, our plants were affected by a brutal and dramatic market downturn that obliged us to make a corresponding cut in production volumes. We deployed all the means at our disposal to downsize production while striving to maintain, as far as was possible, our employees’ compensation levels (training programs, vacation leave, maintenance work), although the scale of the crisis unfortunately prevented us from fulfilling this goal entirely. We remain ready to return to our former production levels so as to take advantage of all the efforts deployed over the recent years as soon as the markets pick up.

Deploying our global industrial strategy while putting our values into practice

this evolution. Working close to our customers means that we can achieve optimum delivery deadlines and understand better their professional activities and needs. Moreover we aim to adjust the size or specialization of our plants so as to guarantee sound productivity levels, in line with one fundamental goal: Michelin tires must be identical in quality wherever they are manufactured.

Strengthening the West, Developing the East

Our industrial strategy therefore consists in establishing an international network of high performance plants that are close to the main markets. The scope and geographical location of these investments are crucial decisions for the Group’s future, and the reflections that lead to such decisions integrate our willingness to put our responsibility principles into practice.

This approach is summed up in our strategic vision by the expression “Strengthening the West, Developing the East”. We have already been contributing to this objective for several years through our industrial policy. We are increasing the productivity of our industrial potential in the West and developing significant new capacities in high-growth zones. The table below indicates the main development areas over 2007-2008, the achievements and projects under way.Finally, our Clermont-Ferrand headquarters (France) and Geographical Zones central departments actively contribute to the efforts toward competitiveness.

The Michelin Olsztyn plant in Poland

Developing markets Mature markets

plant under study;

tire production plant.

production and productivity;

closure of the Toul site, construction of a logistics center in Valenciennes;

Achievements and projects under way


Hence, a plant that applies the MMW recommendations is capable of progressing simultaneously on every front. A tidy workstation for example does not only enable faster work: it also fosters safer working conditions and improved product quality. Safety, quality, productivity and ergonomics are not confl icting; on the contrary they reinforce each other.

Reference and excellenceBy basing our approach on the MMW, when we manufacture a tire, everywhere in the world we apply the Group’s quality principles. For each element of the method, one of our plants is designated as a “reference” and another, that has exceeded this stage, becomes a site of “excellence”. In this way, the method is deployed according to a collaborative model whereby each site helps another to progress. It is never perceived as theoretical, because each good practice is based upon a proven example, a concrete application.

Coherently interlinking independent toolsWe have also undertaken the unifi cation of the various methods practiced distinctly by other industries, to make them more integrated and effi cient.

Thus, we have brought together in a logical structure the ten fundamental tools for use in workshops: the Bib Standard (tidy, clean workstations), Bib Flex (tool changeovers from one

“At the end of 2008, after four years of work, the Michelin Manufacturing Way has been generalized. Out of the 350 “good practices” at the heart of the approach, over 75% are now in application in all our sites.”

Jean-Christophe Guérin,Head of the Prevention and Industrial Performance Department.

Michelin Manufacturing Way (MMW), our approach to industrial excellence, was developed in full coherence with the Group’s fi ve fundamental values, as laid down in our Michelin Performance

and Responsibility Charter. The main indicators on which this approach is based embrace not only productivity, but also improving safety at work, ergonomics, quality (satisfaction rates, product quality measurement), and the use of resources (measurement of product waste).

Because it is based on our corporate values, the model has been disseminated and has taken root in just a few years. Inspired by lean manufacturing methods, MMW has been entirely tailored to suit our own context. During its gradual implementation, we also observed the virtuous effect of simultaneously putting our fundamental values into practice.

series to another) and Bib Boost (a transversal multi-disciplinary team that focuses for several days on improving a workstation). All have become the different facets of the same construction. We have thus developped a unifi ed management method which places people at the heart of the progress approach: operators are entrusted with Safety, Machine, Quality, Delivery and Cost responsibilities (SMQDC – page 51 ).

The next objective in terms of industrial performance has already been selected: generalize the “value chain assessments”. In a plant, these evaluations involve several dozen people. First they plot on full-size diagrams the production process, product fl ow and the inventory, which they then endeavor to improve. Observed productivity improvements are on average in excess of 10%.

Deploying our best practices

Practical team application of MMW in the Campo Grande plant, BrazilAll manufacturing operations benefi t from MMW good practices, Victoria plant, Spain.

Bib Flex is the module of the MMW (Michelin Manufacturing Way) method aimed at improving productivity during tool changeovers on machines. It is adapted from the SMED (Single Minute Exchange of Die) module. Bib Flex signifi cantly leverages customer satisfaction, because it enables smaller series to be manufactured more economically and faster. To implement Bib Flex, a team of ten operators and experts

Bib Flex: more fl exible production

TIRE MANUFACTURING

37

Guaranteeing manufacturing quality, being accountable for our products’ safety“Michelin’s quality in terms of safety generally goes beyond national and international standards.”

Luc Rollier,Group Quality Director.

Michelin’s ongoing commitment to product quality is the result of an obvious reality: a tire is not a commonplace product. By the fact that only a few dozen square centimeters are in contact with the road, people’s safety is at stake. At a time when global markets are increasingly sensitive to product safety issues and product recalls due to defects have become more widespread, this constant safety objective appears more justifi ed than ever. It can only be achieved by the implementation of a strong and rigorous approach such as the Michelin Quality Approach, which seeks to defi ne our fundamental practices, in order to completely satisfy the overriding priority for product safety. Such practices are applied to tire design, then to the industrial stage to guarantee the quality of manufacture, and fi nally to the monitoring of products delivered to markets in order to ensure we remain attentive to our customers and react promptly to their feedback. Each person in our Group is involved, because “Quality is everyone’s business”.

The specifi city and strength of the Michelin Quality approach is that it is founded fi rst and foremost on individual skills, which are then backed up by the system. The importance given to training bears witness to this philosophy. The crucial issue then

becomes our capacity to manage these skills in the long term, notably in training and recruitment.

The challenges raised by quality, and therefore by safety, have become even more complex over the past few years due to the worldwide expansion of our industrial and commercial activities. However, our quality results must be identical for all our products, wherever they are manufactured. As a result, in emerging countries, we attach great importance to the training of employees in our new plants to our very high requirements. We extend the same requirement to new suppliers, which entails great vigilance and increased quality controls on our part. In 2008, training was further reinforced by the launch of the Quality Training Tour, integrated into the Michelin Manufacturing Way standard of good industrial practices: 250 managers have already been trained in Europe and the program is to be extended to North America in 2009.

A preventive visionIn the fi eld of safety, we have always exercised the principle of precaution. Our organization is attentive to our customers’ feedback and carries out useful assessments to be able to react rapidly, sometimes by organizing, at our initiative, product exchanges if we deem them necessary. These are carried out preventively, even in the absence of any certainty regarding a potential safety risk relating to the use of our products. Just one or two comments received by our organization can suffi ce

in some cases to trigger the process. This is the price of the relationship of trust that we want to establish with our customers and experience has shown us that, despite the diffi culties raised by such operations, our customers appreciate our care and recognize our professionalism and sense of responsibility.

Immediate reactionsResponsiveness is a key factor. In April 2008, an incident notifi ed by one of our British customers was analyzed and relayed back to the manufacturing site. Despite the probable lack of any potential harmful consequences, we decided to carry out a product exchange operation. The entire process took place in four days.

Protecting and advising customersIn the case of abnormal usage of a product, i.e. exceeding specifi ed or legal conditions (for example, tires subjected to substantial overloads, a classic situation in some developing countries), we could be tempted to relinquish our responsibility. But again, the safety of our customers and that of third parties extends beyond our sole contractual responsibilities. We take into account such deviations, within reasonable limits, when designing our products. We also strive to raise awareness regarding the crucial importance of the choice of tires in light of their intended usage.

I believe that qualityis everyone’s business, that of every employee, because quality is what our image as employees and our image as a company are founded on. In my job, as soon as I am informed that something isn’t functioning correctly on a machine, I do everything I can to eliminate the problem as quickly as possible; this is my own personal contribution to the quality of our products.”

Jan Jakimicha, Electro-Mechanical Operator, Olsztyn, Poland

“ approach. Ten candidates had been selected

include the level and regularity of quality results and progress dynamics. In 2007, particular importance was given to the empowerment of each employee: we want people, rather

The Karlsruhe plant wins

In 2007, a few Brazilian motorcyclists, after driving for a long period at very high speeds, observed a defect in their front tire, which made driving uncomfortable. As soon as we were informed of these anomalies and in the absence of any actual accident, Michelin reacted and carried out a free exchange of the offending tires, whatever their degree of wear. In this case, we applied our principles of prudence and reactivity, imperative for safety equipment such as tires.

Motorcycle tire recall 2007: safety is Michelin’s overriding priority


Providing attractive careers“Respect for people is one of Michelin’s historic values. Respecting employees entails building a career plan with them that satisfies their aspirations and enables them to develop their skills in line with the Company’s needs. We are convinced that this long-term vision of people management is an asset that will attract and retain the talents we require.”

Jean-Michel Guillon, Head of Personnel for the Group.

One of the challenges facing the Michelin group is that between 2008 and 2013, 30,000 employees will leave the Company due to retirement and 20,000 people will need to be hired. This means that we must recruit nearly 7,000 new employees every year, including one thousand for France alone. For the most part (70%), these new recruits will be young people who have just completed their studies. The challenge facing Michelin is thus to attract and recruit the best candidates.

To this end, it is essential that we capitalize on the specifics of people management in the Group. The “responsibility triangle”

principle is a strong point. Three actors share responsibility for a person’s career development: the employee, his or her line manager, and an identified career manager from the Personnel Department. This triangle functions according to a formalized annual schedule of individual assessment meetings and specific career management reviews. Studies and surveys are carried out to assess the levels of employee satisfaction and commitment.

In 2007 and 2008, the management span of control was optimized, in order to streamline the decision making process, clarify responsibilities and offer new opportunities to those wishing to progress in areas other than team management. In this way, the Company strives to better recognize its experts and their contribution to the Group’s different projects through their specialized skills and their experience.

Michelin also endeavors to broaden the scope of its employer offer. It includes a wide variety of forms of compensation and benefits, development and evolution opportunities, management quality and a workplace environment that enables a balance between employees’ private and working life. Two experiments have been conducted in Russia and China to develop employees’ loyalty to the Company: bonus linked to seniority and employee participation schemes were implemented, for production and management staff alike.

The compensation policy is based on a long-term approach that takes into consideration a person’s responsibilities, individual performance toward collective goals, career development,

market evolutions and local conditions. It makes it possible to enhance and develop the Group’s external appeal, at a time when the lack of young graduates worldwide has already given rise to salary issues, particularly in emerging countries. Finally, throughout the world, Michelin is pursuing its efforts to increase the number of positions held by local employees.

Constructive relations with employee representatives

In addition to individual relations with employees, Michelin enjoys constructive relationships with their representatives: in 2008, 1,969 meetings with trade unions took place and 48 collective agreements were signed in 12 countries, concerning nearly 53,000 people. In Europe, in particular, the Michelin European Works Committee (CEEM - Comité d’Entreprise Européen Michelin), set up in 2000, was a major correspondent with which the Company worked in detail on the issues of safety at the workplace, and on the progression of the Horizon 2010 plan. In the United States, regular meetings are held with the USWA (United Steelworkers of America) to provide information about the Company’s activities. In Brazil, an annual collective agreement has been signed with the Rio de Janeiro rubber industry employees trade union, which determines the general conditions of work and salary increases for 2008 and 2009. In Thailand, the Company has signed an agreement with the trade unions regarding salary increases for 2008, 2009 and 2010, and health care coverage.

The members of the CEEM were provided with a great deal of information about the Group’s strategy in Europe and in particular about how the Horizon 2010 plan will be applied. This information is crucial. It enables employee representatives in each site to have discussions with the management based on figures. An information network has been created among all the different country represen-tatives. This constitutes a stronger force than individual Committees. We would like, particularly in this current period of crisis, to be provi-ded with more information about the future of the Group. We would also like to be less separated due to linguistic barriers.”

Gabriella Turcsan, accountant, Hungary’s representative at the Michelin European Works Committee (CEEM).

“Payroll distribution by geographical zone in 2008(in millions of euros)

Production workers Administrative employees and technicians Managers

800

1,000

1,200

1,400

200

600

SouthAmerica

Africa and Middle East

Europe NorthAmerica

Asia

Production workers 66.7% Administrative employees and technicians 27.4% Managers 5.9%

Headcount distribution by level in 2008(1)

Headcount distribution by geographical zone in 2008 (1)

Europe 73,697 North America 22,987 South America 6,201 Asia-Pacific 13,476 Africa and Middle East 1,204

117,565

(1) Group excluding Euromaster and TCI

400

TIRE MANUFACTURING

39

“Training people means first and foremost job-specific training. However it also entails broadening their knowledge and helping them improve their understanding of the company.”

Dominique Tissier,Head of Training for the Group.

Training at Michelin is more essential today than ever before:

particularly in Asia, and are hiring large numbers of young people who have just completed their studies;

position is thus essential.

In 2006, we decided to systematically offer an Individual Training Program (PIF – Programme Individuel de Formation) for each employee appointed to a new position. This decision came into effect in 2007 and 2008. It derives from the Michelin “right fi rst time” principle. The goal is to ensure that each person becomes 100% operational as quickly as possible. In 2008, 80% of administrative employees, technicians and managers and 100% of production workers benefi ted from a PIF.

We are also developing strategic training programs, whose purpose is to enable a broad-ranging public to acquire or update essential skills. For example, in 2007-2008 we implemented a Sales management program to review the mechanisms and tools

necessary to lead sales teams. Similarly, we are running a Value Creation program to raise managers’ awareness about the cost of capital employed and to identify action levers at their disposal. These strategic training programs will occupy an even greater place in the years to come. Regarding safety at the workplace, substantial efforts have been deployed since 2002. In 2008, we reached the third phase of this campaign with the safety management in an empowered organization training program. By the end of the year, over 10% of employees concerned had been thus trained, a fi gure that should rise to over 70% by the end of 2009.

Training to enrich one’s work

The 2007 Progress Ideas Award ceremony was attended by the 240 best contributors.

Managers

Distribution per training category(as a % of hours per level)

100

80

20

0

40

Production workers

Administrative employees

and technicians Total

60

General training Specifi c professionnal training Management training

In 2008, the percentage of hours of training is distributed on average as follows:

12% Management training,

78% Specifi c professional training,

10% General training.

2006

2.9%

2007

3.7%

2008

4.2%

Evolution of training access rate(number of hours of training divided by the number of hours worked)

2006

52

2007

63

2008

69

Number of training hours per employee per year

Training access rate by geographical zone in 2008

South America

Africa and M

iddle EastEurope

North America

8%

6%

0%

4%

2%

Asia-Pacifi

cChina

approach remains a strong component of Michelin’s corporate culture. Formerly referred to as “suggestions”, it responds to two driving ideas: the Company must be free of internal barriers “because we all work for the same customer” and “we do not have the right to make the customer pay for superfl uous costs”.

one employee out of three proposed an idea and one out of two ideas was put into practice. In the latter case, the originator of the idea receives a bonus calculated on the effi ciency benefi ts achieved. In 2008, 41,322 progress ideas were proposed and 20,128 were implemented.

Tens of thousands of progress ideas

Michelin is committed to a long-term program in favor of a high level of professionalism in every sector. This task involves the participation of the whole company; the goal is to achieve excellence throughout, whether industrially (Michelin Manufacturing Way), in tire design (Michelin Design Way) or in our approach and service to customer (Michelin Selling Way). In departments such as marketing, fi nance and purchasing, internal “schools” are also being put in place.The workers program was set up in 2007 to enable production workers to acquire the basic skills they need to rapidly carry out their task while respecting safety and quality rules. We work both on skills that are essential to the job

from the fi rst day they join the Company, continues during the work post adaptation period and is pursued throughout their career. Each training phase is subject to formal validations, with continuous assessment by a monitor, a professional trainer and a mentor who provides practical assistance to the monitor. The line manager is implicated, assessing needs and accompanying production workers throughout their training and qualifi cation.

develop their skills, it also enables the Company to improve effi ciency and to develop. According to our estimations, the

to develop people and the Company’s performance


“By focusing on safety at the workplace, we are acting on deep rooted motivation within the Company, Respect for People above all, but also communicating on subjects of common interest and increasing effi ciency. At a workstation, the same micro-hazards that disrupt production are four out of fi ve times also the cause of accidents.”

Maurice Jacquemond,Head of Safety of People and Goods.

The signifi cant progress in workplace safety The major plan implemented by Michelin for several years to improve safety at the workplace is bearing fruit: in 2008, the lost time injury frequency rate (see glossary) reached 1.85! Any accident is one too many. However, this result places the Group among world-class corporations and at the cutting-edge of manufacturing industries. It has also prompted us to identify additional tools for measuring progress, as the current indicators have become insufficient. We are now using the employee participation rate in prevention efforts. This rate, measured by the operators themselves, provides an excellent correlation with the number of accidents. From 5% when we fi rst began measurements, it had risen to 52% by the end of 2008. Finally, although the number of accidents has been divided by 13 in seven years and thirty plants achieved a zero lost time injury frequency rate in 2008, the severity rate has not dropped at the same pace and we are stepping up our efforts in this domain.

We are deeply concerned that four fatal accidents occurred on our sites in 2008: the fi rst, in the United States, involved a subcontractor on an electrical repair job; the second, in Spain, concerned a technician carrying out work on the wheel of an industrial handling vehicle; the third accident occurred during construction operations in Brazil when an earthmover vehicle hit a subcontractor’s employee; the last was a fatal fall in a stairwell at our Clermont-Ferrand site (France).

Relying on people training

To reduce the severity rate, Michelin has deployed specific programs focused on “potential risk” operations, such as high-rise work situations, operations in the vicinity of high-voltage zones or operations in zones where all energies (heat, electricity, compressed air, mechanical energy) must first be neutralized. Our goal is to transform safety actions into permanent reflexes. Operators who have encountered a diffi culty, even a benign incident, must also be encouraged to share their experience with the rest of the group.

Following the shop managers’ Managing Safety in my Workshop course, a new program for first line supervisors has been launched: Managing Safety in my Empowered Organization and in my Team; 2,000 people will be trained over 2008-2009. These courses defi ne the roles of each player and train them in the use of operational tools developed for allthe Group’s plants.

Safety at the workplace: exceptional progress over the past few years

Our fi rm intervenes in the Michelin plant to install and maintain electrical cabinets and to manage automats. Seven or eight of our technicians and employees permanently work at Michelin. Michelin is particularly infl exible regarding safety. For each project, we are required to attend a monthly safety meeting during which accident frequency rates are reported. We have also undertaken to provide specifi c training to all our employees working at Michelin, using educational tools that identify all the risks present in each plant.”

Riccardo Galfrè, work foreman at GIORDANO & C. S.p.A., a company specialized in electrical systems based in Boves(Italy, province of Cuneo)

“

Improving road safety at work In 2008, we worked on the question of safety of our employees traveling on the road. A specific Group-wide frequency rate has thus been established. Here too training and awareness-raising are key factors. The fi rst stage of this campaign consists in half-day driving courses for all newly recruited sales representatives. These courses will progressively be extended to all staff members who regularly use a vehiclefor their work.

Including our subcontractors in our approachWe want to extend our safety principles to people outside the Company, such as subcontractors’ employees and temporary staff. We particularly worked with temporary employment companies in order to identify good practices. This joint work enabled us to implement specific actions such as individualmonitoring during each assignment.

Evolution of lost time injury frequencyand severity rates

2005

3.61

0.25

8

2006

2.55

0.21

7

2007

2.39

0.21

18

2008

1.85

0.21

30

Achieve a 65% participation rate in safety initiatives by the end of 2010

Progress objective

The Lockout-Tagout (Loto) process consists not only in deactivating all a machine’s energy sources, but also in preventing their reactivation before work has been completed by attaching a clear tag to all the controls of the machine concerned. At the Michelin plant in Victoria

Loto process was designed by a working group comprised of operators and experts

this approach is in application on 140 machines and 10 electrical sub-stations at Victoria.

All interventions must take place on deactivated machinery

Number of plants withfrequency rate = 0

Lost time injury frequency rate

Severity rate

TIRE MANUFACTURING

41

“The new challenge facing occupational medicine is stress, which is a genuine illness.”

Doctor Angelo Bracco,Occupational doctor for the Group.

New illnesses are emerging today, among which stress is uppermost. One of the main difficulties relating to the prevention of this illness resides in the variety of reactions shown by individuals, which can range from those who simply withstand stress, albeit sometimes transferring it to those around, and others who suffer immense strain. Over the past few years a series of stress management courses has been developed for employee at all levels in the Company. In 2007, we created an awareness module for operators and by the end of 2008, 2,700 people within the Group had undergone 19,000 hours of training on this topic.

The Group’s occupational medicine department permanently monitors employees’ health in terms of classical disorders, by assessing, for example, a person’s aptitude to work in a workshop environment. At a second level, our organization has also run, depending on local needs and specifi cs, health campaigns aimed at employees, which also proved useful for their families: training in lifting loads, preventing back and joint pains, fi ghting against smoking and alcoholism.

One ergonomist for 2,000 production workersPreserving health at the workplace, and in particular preventing musculo-skeletal disorders, is an important issue. We combat such disorders fi rst and foremost by improving the ergonomics of workstations. We also endeavor to help people maintain their health on a proactive basis. Ergonomics also makes it possible to increase team diversity, as it enables women or older workers to operate workstations that were previously too diffi cult. In terms of skills, in 2008 we reached our objective of one qualifi ed ergonomist for 2,000 operators in our European sites and will soon have reached this goal in the United States. We would like to progress faster but are hampered by one of the traits of our industry: the long life cycles of our machines and manufacturing lines. It is always technically more complex to improve an existing machine than it is to design new machines that respect good ergonomic principles. Ergonomics also make it possible to introduce new processes and organizational modes, such as the Atlas mechanized handling system page 50 .

Industrial hygiene: improved risk management

The central team in charge of industrial hygiene leads a network of Group Hygiene correspondents and is backed up by material experts from the Technology Center and occupational doctors. It intervenes in two main sectors: asbestos and chemical hazards. A report of our statutory asbestos compliance carried out in

2007 in all our industrial sites provides a detailed inventory of the materials that contain non-friable asbestos, whose fi bers are not released into the atmosphere, still present on our premises or in equipment, as a result of which we are able to plan annual withdrawal programs.

In terms of chemical hazards at the workstation, the Company employs a centralized information system to draw up safety documents (safety data sheets, product safety instructions at the workstation, transport documents), in line with legislative and Company standards. A new analysis tool has been developed and its deployment in 2009 will make it possible to characterize situations and program any necessary actions.

Providing equipment for daily emergencies All our sites are now equipped with defi brillators. This equipment has proven its effectiveness in three successful interventions: two-thirds of cardiac arrests can be counteracted by the use of a defi brillator and every minute lost can reduce the vital prognosis by 10%. This measure goes hand in hand with an objective reached in 2007, whereby 10% of employees successfully completed fi rst-aid training. This proportion guarantees that at whatever time and however workforce numbers vary, there will always be a trained fi rst-aid employee on hand in the plant.

Improving health and quality of work life

Gymnastics session in our Homburg plant in Germany

In the United States, the Choose well, live well program, available to all employees, has led to the designation of “health advocates”, who not only offer advice in the case of problems, but also raise awareness toward a healthier lifestyle and reasonable amounts of physical exercise.One of the aspects of this program consists in overtlyplacing employees in a situation of responsibility:improved health not only raises their daily quality of life but also reduces their healthcare spending and that of the Company.

Successfully making employees responsible

The evolution of the employee population

At the Karlsruhe plant for example the average age is 43; this means that, in light of the retirement age, such employees still have over 20 working years ahead of them. Helping them

To reach this goal, Michelin stresses the need for prevention: healthy menus at the canteen, vaccinations, exercises to develop backand stomach muscles and advice froma physiotherapist.

Senior employees


“In the area of diversity, we have evolved from an initial awareness-raising phase to quantitative indicators and then developing objectives; progress followed, along with the conviction that diversity effectively contributes to the development and performance of the Company!”

Elisabeth Grimaldi d’Esdra, Head of Diversity for the Group.

Diversity in the company clearly represents a practical application of the Respect for People value, inherent to the Michelin Performance and Responsibility approach. It also drives progress in the Company because, by mirroring the world’s diversity through a diverse workforce, we can increase our capacity to better serve our customers. Five diversity aspects have been selected: gender, culture and nationality, ethnic origin, age and physical capability. We measure progress according to six specific indicators: proportion of female employees, of women hired,

of disabled employees, of women and non-French employees in senior management positions and equality of compensation between men and women. Statistical data and the monitoring of actions carried out in each site within the Group complete our management tools.

Our approach is promoted by a worldwide network of about twenty correspondents, led by a Group manager and a Diversity Steering Committee, made up of operational and functional managers. Some 600 people in all are part of the diversity network.

In October 2008, we held our second International Convention on Diversity in Clermont-Ferrand (France), with Michel Rollier, Managing Partner of the Group attending, in order to assess progress and define our orientations. The 160 participants, among whom were principle business managers and correspondents of the Diversity network, were able to discover the scope of actions carried out in each country. They were also able to recognize that diversity is a competitive asset for Michelin, summed up in the words of one of the delegates “How can we be attractive to the labor market and develop if we are not diverse? How can we interact with our customers if we do not reflect their diversity?”.

Diversity achievements in North America Although the principles of our Diversity approach are developed at the Group level, their application is often tied to local

conditions. This is the case in North America where commitment and results are particularly noteworthy. The diversity network is made up of some sixty people. Nine Diversity Councils play a more operational role at local level. Several specific networks of employees also exist, such as the Women’s and African-American Networks.

In the United States, actions first and foremost pursue quantitative results with two goals:

one female or person of color. By the end of 2008, this figure was 87%;

this figure was 35.8%.

We also implement our approach to diversity through training. More than 700 people attended courses aimed at understanding minority groups’ point of view and measuring the consequences of discrimination.

Finally we would like to highlight a self-assessment tool for employees designed by a management member of a Diversity Committee that will be proposed to several services in the Company in 2009. Comprised of 34 questions, it helps people assess whether their daily acts illustrate their implication in the respect for diversity.

South Carolina is a very diverse state, by ethnic origin and by culture. But instead of this diversity being an opportunity for our citizens, it is very often an obstacle. By being the primary supporter of our training program, Michelin allows dozens of leaders in the private and public sector to better understand diversity and how they can benefit from it. Michelin, which has already applied its diversity approach in a responsible manner through their selection of suppliers, is a leader in the utilization of certified minority businesses, which thanks to Michelin’s reputation, sets an example to all industry.”

Juan Johnson, Responsible for Furman University’s Diversity Leaders Initiative, in Greenville (United States)

“Delegates at the International Convention on Diversity

Production workers

Administrative employees and technicians

Management

Senior management

Gender distribution by hierarchical level(1)

(as a percentage, as of 12/31/08)

Women Men

84.1%15.9%

73.6%26.4%

(1) Group excluding Euromaster and TCI

91.4%

8.6%

94.8%

5.2%

Geographic origin of senior management(as a percentage, as of 12/31/08)

Europe North America South America Asia

1.7%77.6% 17.9%

2.8%

A daily commitment in favor of diversity

TIRE MANUFACTURING

43

Progress initiatives in our fi ve development areasIn relation to the proportion of women to men in the Company, we are working at every level of the hierarchy. We aim to raise the global attractiveness of industry as women are under-represented in the educational institutions teaching our professions. In the manufacturing fi eld, ergonomic progress has made it possible for women to assume functions previously closed to them. At present, the Group however employs very few women among its production staff: 8.6% at the end of 2008. This fi gure rises to 26.4% for administrative employees and technicians, and to 15.9% for management staff. Increasing these proportions depends in particular on a proactive career management, including, where possible, in an international context, and on the support of a mentoring and experience sharing network. The Personnel Department is naturally a driving force in such approaches. The issue of ethnic origin is high on the agenda of our actions in North America, but also in Europe, for example in terms of recruitment and integration processes. Local initiatives are undertaken, such as that in Nova Scotia (Canada) where an agreement was signed with the local African-Canadian community and the province government to facilitate the hiring and retention within the Group of people of African origin.

The internationalization of management is continuing with the career development and experience building of non-French and non-European managers. This is the case, for example, in Asia where Michelin’s sites are more recent.

The issue of senior employees is also becoming a prominent issue. One-third of our employees, primarily production workers, are today over the age of 50 and this proportion is going to grow. In this area, we are implementing several actions:

Evaluation du Niveau Ergonomique - Ergonomic Level Evaluation), which assesses the ergonomic level of workstations and is applied in all the Group’s plants, aims to measure and then reduce the physical load of workstations;

(13% of senior workers in France benefited in 2008)or offering assignments abroad lasting several months(65 operator and technician assignments in 2008 in France);

recruits, enabling common progress.

The employment of disabled workers is perhaps the most complex of our five development areas; Michelin is an industrial company and many of our positions involve a physical component. The Group’s policy, formalized in 2006, offi cializes the principles regarding disabled employees, including an obvious non-discrimination principle, but also the desire to recruit and provide lasting employment. Progress in this fi eld has been given concrete illustration in several countries such as Brazil see feature and France.

Diversity is a daily issue

Practical progress in the field of diversity requires specific approaches. One of these involves the personal commitment of management, senior management in particular, thereby fully illustrating our genuine interest in this domain. Another is the promotion of local achievements, led by small groups; we have observed such initiatives mushroom rapidly and autonomously. Among the many local achievements, the following are just a few illustrations:

and preventative discriminatory practices training for the 2,000 managers;

fi fteen women shared with their colleagues the way they balance their personal and working lives;

2007 to enable different nationalities present on the site to work together in harmony;

opportunity for women and men, the rate of female presence in positions capable of being held by women exceeded 25% in 2008;

Employers For Workers Over 50 by the AARP (American Association of Retired Persons) for the third time in 2008.

My position today, in a predominantly male environment, has enabled me to fl ourish professionally. My ease of integration was facilitated by a few simple principles, that I am convinced are not purely female skills: patience, listening and above all teamwork. Both with my supervisor colleagues and with my own production team, I focus fi rst and foremost on the human factor, which involves setting the example myself when working toward a common goal. For a woman, there is another very simple benefi t in working in an environment which makes overalls compulsory: they camoufl age differences in appearance between men and women!”

Lise Marie, Logistics Manager for the manufacture of elastomer compounds, Michelin-Kleber plant at Troyes, France

“Michelin students at the school for hearing impaired persons

In Brazil, Michelin has carried out specifi c actions

trained in Libras (Língua Brasileira de Sinais), the offi cial sign language in Brazil;

on the site, with the assistance of a Libras translator;

In Brazil, actions in favor of hearing impaired persons


“In 2008, Michelin assisted a company that helps people until then excluded from the labor market fi nd jobs. This is a fi rst. Due to the specifi c nature of the activity offered, disassembly of video screens, and to the social origin of the employees, it is an area that requires a special approach but that is both promising and in line with Michelin’s values.”

Bernard BouchardHead of the SIDE – Michelin Développement France.

In 1990, to contribute to the economic development of the regions in which its sites are located, Michelin founded in France the SIDE (Société d’Industrialisation et de Développement Economique), the French structure of Michelin Development. The Group went on to establish similar structures in Europe and North America. Their vocation is to help create jobs, because Michelin, active and committed in the regions where it operates, wishes to contribute to the development and diversifi cation of the industrial fabric.

Our fi rst tool consists of loans we help companies obtain. The amount of the deferred payment and reduced-rate loans depend on the number of jobs created. The loan always plays a signifi cant leverage role because banks and local authorities, seeing Michelin’s confi dence in the project, commit themselves as well.

Our second tool involves technical assistance. In many specialised areas, small-scale companies are unable to carry

out the studies they required, whereas, among the many engineers and experts in the Group, there is bound to be one capable of studying each case.

Two exemplary cases of revitalizationMore recently, Michelin Development has been involved in creating jobs in times of crisis, i.e. when restructuring becomes unavoidable in one of our sites. This does not entail reassigning employees who have lost their jobs; such a delicate task is entrusted to Michelin’s Employee Relations department. Rather, this means preventing regions from losing their vitality.

Following the closure of our site at Poitiers (France) in 2006, all the plant’s employees were reassigned, either internally or externally. Beyond this however, Michelin Development contributed to the creation of 450 jobs over a two-year period. The “Eco & Mobilité” Group, specializing in small electric-powered vehicles, was among the companies that benefi ted from this operation.

In 2008, Michelin and its Employee Relations Department implemented a particularly structured program to deal with the closure of the Kleber site at Toul (France), leading to the suppression of 826 jobs. Since May 2008, Professional Transition Workshops (ATP, Ateliers de Transition Professionnelle) set up by Michelin, have been receiving all the site’s employees who subscribed to the Kleber Mobility Program in successive groups. The ATP structure provides them with the means to help them

develop their forthcoming professional career: advisors, points of information, technical training (robotics, masonry, welding, industrial or home electricity, etc.), a partnership with the ANPE (French National Employment Agency) and a Resource Center. All these tools proved their effectiveness: by the end of December 2008, more than 333 employees had found a new job.

In addition to these achievements, Michelin Development is also active in the Toul region. The fi rst three projects aimed at setting up new activities will enable the creation of over 450 new jobs. In all, the SIDE is committed to creating 900 jobs, 300 of which on the former Michelin site and 600 in the vicinity.

In Europe, since its inception, Michelin Development has provided nearly 1,000 technical advisory missions (500 in France). It has contributed to the creation of 18,000 jobs (14,000 in France), participated in the validation and fi nancing of projects, mainly in Germany, Spain, France, Italy, United Kingdom, but also in Hungary, Poland and Romania. In 2008, Michelin Development helped to create 2,000 jobs in Europe.

A Michelin Development structure has also been set up in the Canadian region of Waterloo, where Michelin closed a plant in 2006. Since then, it has enabled 18 companies to obtain nearly three million Canadian dollars in loans, thereby contributing to the creation of 700 jobs (304 in 2008).

Taking action in favor of employment

The Simply-city electric vehicle produced by “Eco & Mobilité”, a company assisted by Michelin

in point. This substantial family-owned business, based

and wanted to open a production and logistics center to serve the Southwest European market. Technical studies carried out by Michelin logistics experts indicated that the Thiers region in France, well located in terms of highway network, would be an excellent choice. Thiers is located near Clermont-Ferrand. SIDE Michelin Development thus

company to obtain a inaugurated in September 2008, giving rise to the creation of 170 jobs on the site.

At a time when the banking crisis is making it diffi cult to obtain loans, Michelin Development UK is playing an even more central role in helping businesses. Since 2003, it has helped businesses obtain £3 million in loans, leading

Burnley, Lancashire is one of the companies assisted. It supplies automatic devices that measure the quality of drinking water. Thanks to a £32,000-loan, it was able to make the necessary investments that clinched

could thus pursue its development.

Michelin Development UK helps business

TIRE MANUFACTURING

45

Contributing to the quality of public decisions“Our goal is to contribute to the quality of public decision making, by fostering constructive relation-ships founded on trust with public authorities and professional organizations.”

Patrick Lepercq,Director, Group Public Affairs Department.

In 2007 and 2008, one of our major contributions involved new European guidelines on tires that will implement three main measures:

overall assessment of a vehicle’s CO2 emissions;

sold in the European Union, to contribute to European environmental objectives;

grip on wet surfaces, which is a guarantee of safety, energy efficiency, which determines fuel consumption and CO2 emissions and lastly noise.

This work involved Michelin in nearly 500 contacts with European Community representatives in 2008. These decisions will enable signifi cant progress in the overall performance of road mobility and particularly in the consumer’s understanding of the importance of tire choice pages 26, 55 .

In Europe, Michelin has contributed to studies about longer trucks that could bring reductions in fuel consumption and CO2 emissions, as well as better use of road infrastructures.

The Public Affairs Department also intervenes when restructuring makes it necessary to close a site page 44 . In such an event, we dialog with public authorities to explain our strategy and coordinate actions. In this way, we have intervened in recent years in Kitchener (Canada), Port-Harcourt (Nigeria), Lasarte (Spain), Turin (Italy) and Poitiers, Bourges and Toul (France).

Concrete involvement in local lifeWherever it operates, Michelin plays an active role in the life of local communities by establishing constructive relations with local organizations (town councils, educational establishments, associations, etc.). Michelin takes part in their activities, either by sharing its experience or by providing funds, with a particular focus on three domains: mobility, education and cultural, sporting and charity events. In 2008, in all, over 16,200 days were devoted by employees to such initiatives and a total of 9.1 million was granted by the Company to external organizations.

A wide range of actionsAmong our contributions, the following are just a few:

road safety actions by local automobile clubs, funding

Communicating with local authorities, helping communities

Michelin volunteers at work on the Habitat for Humanity project in South Carolina

Transport - Road Safety 10.6% Environment 10.0% Michelin visits and events 11.2% Management, organization and Public Affairs network 18.2% Corporate governance 1.8% Social 6.9% Standards and regulations, Sales,Industry, Competition,Industrial property 32.1% Public funding, accounting,tax, etc. 9.2%

Activities of the Group Public Affairs Department(as a % of time spent)

medical equipment for hospitals, sponsoring sporting clubs; in Clermont-Ferrand (France), since 1911, we have been strongly involved in the sports club ASM (Association Sportive Montferrandaise), as much financially as in terms of time spent by our managers; ASM provides its 3,000 members with 3 training sites and 15 sports sections conducted by 400 managers, with a particular focus on the training of young people.

aid association, food bank operation, the Habitat for Humanity house building program see feature .

and the Sichuan earthquake, nationwide campaign to promote the use of a helmet among two-wheeler users, tires donated to emergency services;

alcohol and drugs, renovation of a sensorial garden for the visually impaired;

help disabled people.

Clermont-Ferrand hosted a working meeting between representatives of the Algerian

The Algerian visitors presented examples of

making it possible, by the use of end-of-life tires, to stabilize civil engineering structures, particularly in seismic zones. Aliapur representatives presented achievements and research in the fi elds, among others, of drainage, subterranean water reservoirs and the production of special coated materials.

Encouraging public-private collaboration in Algeria

of the Habitat for Humanity project is to help a low-income household become the owner of a new house by paying minimum mortgage installments. A house was built during

Carolina), a project was implemented at the initiative of Michelin’s Diversity team who wanted to break down existing barriers. The house, to which Michelin also contributed fi nancially, was inaugurated in the summer of 2008.

Housing a destitute family


Since 1998, the implementation of the Group’s environmental policy in our industrial sites has been guided by the Michelin Environmental Management System (MEMS). Designed to control and reduce the environmental impact of our sites, it is the foundation of our progress approach.

Deploying the MEMS worldwideOur objective is that all newly acquired sites implement the MEMS within a maximum of 5 years. At the end of 2008, among the industrial sites, Technology Center sites and rubber tree plantations, 94% of those acquired over 5 years ago had implemented the MEMS. The approach is currently being deployed in logistical sites. The recently integrated Tigar site in Serbia will be deploying the system in 2010.

The MEMS comprises in particular:

requirements and “Group Environmental Requirements”;

in line with local issues;

The MEMS also enables the Group’s sites to obtain ISO 14001 certifi cation. In 2008, 99.5% of our tires were manufactured in ISO 14001 certified sites. The Group’s two rubber tree

plantations, the main Technology Center sites and all our semi-fi nished product plants were also certifi ed. In 2008, our French headquarters of “les Carmes” in Clermont-Ferrand (France) also obtained ISO 14001 certifi cation.

Group Environmental RequirementsDeve loped in 2004, the “Group Env i ronmenta l Requirements”define the level of performance required by Michelin, which sometimes exceeds local regulations. They apply to all new and modifi ed installations and enable the Group to pursue an objective of environmental excellence in its sites.

At the end of 2008, analyses of discrepancies with regard to the “Group Environmental Requirements” had been carried out on nearly 94% of our existing installations (industrial sites and Technology Center sites).

Toward an integrated environment-prevention systemStrong synergies exist between the prevention of industrial risks and the preservation of the environment. To reinforce the coherence of our actions in these fi elds, we are incorporating risk prevention into the MEMS to progress towards an Environment-Prevention Management System (EPMS). At the end of 2008, nearly 70% of our industrial had already implemented an EPMS.

The MEF reduced by 21.4%! Implemented in 2005 to ensure effi cient and overall steering of the environmental performance of the Group’s sites, the MEF (Michelin sites Environmental Footprint) aggregates the six most relevant environmental areas related to the medium-term challenges of our activities. Each component is weighted according to its relative signifi cance see diagram . Included in the Group’s corporate scorecard since 2006, it is reported quarterly and covers the 68 industrial sites.In 2006, we defi ned an overall objective to reduce the MEF by 20% by 2011 compared to the reference year of 2005. The mobilization of our teams enabled us to reach this objective by the end of 2008: -21.4%. As progress was made faster than anticipated, in February 2008 we defined a new objective for 2013: reduce the MEF by 30%, again compared to the reference year of 2005, representing a further 10% reduction over the 2009-2013 period.

Environmental impact of our sites: remarkable progress

Campo Grande, Brazil, fi rst Michelin site certifi ed ISO 14001, in 1998

To ensure the robustness of risk analysis and the relevance of solutions adopted, the Michelin group has developed a network to address aspects related to the environment, hygiene, safety at the workplace and industrial risk prevention.

one hundred specialists over the different countries and

on each site.

and has a specifi c budget.

An extensive Environment

TIRE MANUFACTURING

47

CO2 emissions downIn 2008, direct emissions of greenhouse gases by the boilers of our industrial sites represented 0.6 metric tons of CO2 per metric ton of fi nished products, which is 20% less than in 2005. In the European Union, these emissions are subject to legislation on CO2 emission allowances. In 2007 and 2008, emissions by the Group’s European sites remained slightly lower than those allowed.

Michelin plants also consume electricity and thermal energy (steam), responsible for indirect emissions of greenhouse gases. In 2008, these indirect emissions represented 0.75 metric tons of CO2 per metric ton of fi nished products, which is 2.3% less than in 2005. As a result, 1.35 metric tons of CO2 is emitted overall per metric ton of tire manufactured.

Energy effi ciency and renewable energies at the forefrontIn light of the issues of climate change and the constant rise in energy prices, reducing the energy consumption and CO2 emissions of our sites is a priority, both environmentally and fi nancially.

To meet this challenge, a working group devoted to energy has been set up within the transversal Europe Industry team. This working team features complementary skills in the fi elds of the environment, energy purchasing, manufacturing techniques and fi nance management of CO2 emission allowances.

Over the 2007-2008 period, we focused our efforts in two main areas:

The energy consumption of our industrial and logistics sites has dropped by 12% from 17.4 gigajouls (GJ) per metric ton of tires manufactured in 2005 to 15.3 GJ/metric tons in 2008.

Deploy the MEMS in 100% of newly acquired sites within 5 years

Implement an integrated environment-prevention system in 100% of our industrial sites by 2011

Progress objective

Consumptionof resources

Airborneemissions

Waste

Components Weighting

15

15

25

1515

15

- 30% target for 2013

MEF Indicator - Basic components and weighting

Evolution of MEF Indicator 2005 - 2008

Unit 2005 2006 2007 2008 Evolution 2005 - 2008

Energy consumption ** GJ/tPP 17.4 17.2 15.6 15.3 - 12.1%

Water consumption ** m3/tPP 15.0 14.9 13.3 12.8 - 14.7%

VOC emissions** kg/tPP 4.27 3.97 3.48 3.13 - 26.7%

CO2 emissions** t/tPP 1.53 1.48 1.37 1.35 - 11.8%

Waste generated ** kg/tPP 140 130 128 127.5 - 8.9%

Quantity sent to landfi ll ** kg/tPP 33 26 20 16.2 - 50.9%

2013 target compared with 2005 2005 2006 2007 2008 Evolution 2005 - 2008

MEF** - 30% 100 92.9 83.6 78.6 - 21.4%

Evolution of MEF 6 components

The wind turbines at the Dundee site (Scotland) produce the equivalent of 20% of the site’s electricity requirements.

* VOC : Volatile Organic CompoundtPP: metric ton of tire produced


Energy

Water

VOC*

CO2

Quantitygenerated

Quantity sent to landfi ll


Energy assessments in 77 sites!The multidisciplinary team entrusted with improving the energy effi ciency of our plants has deployed its energy assessment methodology and inventoried and distributed good practices in the form of a Group Referential. By the end of 2008, an initial assessment had been carried out in 77 sites, leadingto the defi nition of action plans. A second assessment phase has been launched that reveals an average 84% application rate of good practices. Performance indicators that monitor energy consumption by sites have been implemented in North America and Europe.

In the framework of its Renewable Energy policy, the Group examined all its sites in order to compile a portfolio of projects that will contribute to reducing CO2 impact. Several facilities have been set up in recent years, including two wind turbines which supply 20% of the Dundee (Scotland) plant’s electricity requirements, steam generated through the combustion of

industrial and medical waste to supply our synthetic rubber plant in Bassens (France) and solar panels on the roofs of four sites in Germany (Bad Kreuznach, Homburg, Bamberg and Landau). Other projects are underway, such as the installation of solar panels on two other German sites (Ulm and Karlsruhe), wind turbines in Ballymena (Northern Ireland) and biomass combustion facilities in Bourges (France).

Since 2007 Michelin has also been a member of the Green Power Market Development Group, which is run by the World Resources Institute (WRI) NGO.

Another example of improved energy effi ciency is illustrated by our plant in Dundee (Scotland), which has developed a system that optimizes the planning of tire vulcanization when its workshop is not running at full capacity. By concentrating this operation on a predefi ned number of curing presses, those not in use can be switched off, resulting in a corresponding drop in steam requirements of between 15 and 20%.

Volatile organic compounds: innovative processes reduce emissionsEmissions of volatile organic compounds (VOC) occur at different stages of the tire manufacturing process. Since 2005, our VOC emissions have been cut by 27% thanks to the implementation of innovative manufacturing processes leading to a reduction in the use of solvents and the processing of residual steam. The most consequential progress has been achieved in Europe by the Passenger car and light truck product line, which has reduced its consumption of solvents by more than 72% since 1992.

Upgrading waste recovery Our priority in terms of waste management consists in reducing the quantity of waste sent to landfi ll by favoring recycling.

Scrap rubber, textile plies and metallic plies used to manufacture tires are the main waste products generated by our activities. We reintroduce these waste products as much as possibleinto our manufacturing processes, in compliance withour quality requirements.

Environmental impact of our sites: remarkable progress

The roofs of the Landau warehouse in Germany are covered with solar panels.

The Zero Waste to Landfi ll program implemented by Michelin’s plant in Ballymena, Northern Ireland, was rewarded twice by the 2008 Sustainable Ireland Awards, winning the prize for the and

. The project involved defi ning the different families of waste generated by the plant – 44 families in all were identifi ed – and fi nding appropriate recycling applications for each one. By the end

joined the National Industrial Symbiosis program, enabling the Ballymena plant to investigate alternative recycling possibilities with the result that it now recycles

being sent to the landfi ll.

Zero Waste to Landfi ll at the Ballymena plant

Solvent consumption of the Passenger car and light truck Product Line in Europe

92 94 96 9793 95 98 99 00 01 02 03 04 05 06 07 08

End 2008 - 72%

Base 100: 1992

0

20

40

60

80

100

TIRE MANUFACTURING

49

Non-reusable waste becomes “production waste”. Dedicated teams are establishing sustainable recovery networks for this category of waste. Other forms of industrial waste generated by our activities (paper, packaging, household waste, purifi cation center waste, engine oil and electrical and computer components) are entrusted to certifi ed service providers who seek the best processing applications and are committed to quantifi ed landfi ll disposal reduction objectives.

Our overall objective is to reach a recovery rate close to 100% by the end of 2013 for “production waste” and other industrial waste. At the end of 2008, this objective had been practically achieved for “production waste” in Europe, while other geographical zones are making substantial progress.

Since 2005, our efforts have enabled us to reduce the quantity of waste generated by our activities by nearly 9% and the quantity of waste sent to landfi ll by over 50%.

Careful water managementThe Group’s plants use water mainly for cooling purposes and as a heat transfer fluid. After appropriate processing,

the water thus used is released, either back into the natural environment or into local sewage centers.

To limit water consumption, we are gradually replacing open cooling circuits with closed systems and are closely monitoring utilization to prevent any risk of leakage or waste.

Between 2005 and 2008, these actions made it possible to cut our water consumption by approximately 15%.

Preserving ecosystemsMichelin, like all companies, benefi ts from “services rendered” by ecosystems and is acutely conscious of their essential role and vulnerability. 50% of the rubber used by Michelin, for example, is a renewable raw material: natural rubber produced by the rubber tree.

In order to continue to benefi t from ecosystems on a sustainable basis, Michelin is taking action today in several areas to reduce its impacts and to protect ecosystems and biodiversity:

Michelin Performance and Responsibility approach;

materials to manufacture, with better energy effi ciency and longer life;

the preservation of local ecosystems and application of the “Group Environmental Requirements” if the latter are more stringent;

sensitive environments around some of our sites;

Ecosystem Services Review) ona multi-activity industrial site;

For more information relating to our actions in favor of the preservation of ecosystems pages 18-19 .

Waste treatment at the Blavozy plant (Le Puy en Velay, France)

undertook a major project that sought to optimize aqueous waste treatment. Entitled Verdido Cero (zero waste),it led to the reduction and better control of water released back into the natural environment by guaranteeingthe quality of effl uents thanks to an at-source capture system. While effl uents were formerly directed to the site’s sewage treatment plant, they are now processed in the workshopby a capture and ultra-fi ltration system. Once treated,the waste water is sent to a neutralization plant that controls its quality before releasing it into the local sewage system. A retention basin is able to store the efffl uents in the case of localized pollution. Moreover, the rainwater collection system has also been optimized by implementinga monitoring system (continuous measurements, video surveillance of output) which can also direct rainwaterto the retention basin if necessary.

The Verdido Cero project in Valladolid: responsible management of aqueous waste


The analysis of the tire’s life cycle shows that the transportof raw materials, semi-finished products and tires onlyaccounts for a small percentage of its total environmental impact. In 2008, in terms of our logistics, road transportrepresented 83% of our global transport costs, the remain-der being broken down between maritime (12%) and airand rail transport (5%).

Vigilant monitoring of our transport providersThe transport of our raw materials, components and fi nished products is entrusted to specialized service providers. When working on our sites, our transporters’ employees are informed of and implicated in our Quality, Environment and Prevention approaches. The conditions in which loading and unloading of trucks and containers is carried out and the storage of goods are therefore monitored very closely.

Local initiatives have also been implemented to reduce the environmental impacts of transport. In the United States, for example, since 2004, we have been taking part in the EPA’s (Environmental Protection Agency) Smartway Transport Partnership program, which aims to cut CO2 and conventional pollutant emissions produced by road transport. Through this program, we are committed to entrusting EPA-certifi ed trans-porters with the transport of at least 50% of our goods.

These transporters are committed to improving theirenvironmental performance by working, for example, onlogistics optimization or vehicle aerodynamics, by equipping their fl eets with automatic tire infl ation systems or by replacing dual tires with extra-wide tires. As a customer of such fl eets,we are committed to reducing our transport-related emissions by taking action, in particular, to optimize freight volumes,reduce idling time and improve load planning. Moreover, concerning safety, we provide drivers with rest areas.

Optimizing truck loadingEurope’s logistics teams, in collaboration with technicalmanagers, have developed the Atlas process which optimizes tire packaging with automatic fi lm-wrapping and mechanical

handling. The advantages offered by this machine installed downstream of the production line are numerous:

nomics improvements for the operators, on each transfer stage in the logistics process: in the factory warehouses, in the super-storage facilities upstream and in the general warehouses.

to 30%, thereby reducing the number of vehicles necessary for transporting the tires and resulting in fuel savings and lower CO2 emissions.

to mechanized loading and unloading, greatly appreciated by the transporter.

The first machine, installed in Dundee, Scotland, alreadyprocesses a third of the plant’s production. Five years from now around twenty of these machines should equip Passenger car and light truck tire plants in Europe.

Reducing the impact of our freight transport

Carry out a carbon footprint assessment of the road transport of our goods in 2009

Progress objective

Atlas machine optimizing tire loading

2008 Transport costs distributionby mode and geographical zone(in percentage)

Rail transport Air transport Maritime transport Road transport

South America0

Europe

North America

Asia-Pacifi

c

50

40

30

60

10

20

In 2008, Michelin evaluated the greenhouse gas emissions related to the maritime transport of its goods and fi nished products, by using the emission coeffi cients drawn up

(1).

of CO2, according to the geographical breakdown below.

(1) Clean Cargo Group: work group composed of 28 shippers as well as maritime freight carriers whose purpose is to promote sustainable maritime transport (www.bsr.org/membership/working-groups/clean-cargo)

The carbon footprint of Michelin’s maritime transport

Transatlantic 11% Europe – Asia (via Suez) 18% Transpacifi c 27% Europe – South and Central America 5% Intra – Asia 5% Europe – Middle East 9% Others 25%

51

Focus

Michelin’s Homburg plant in Sarreland (Germany) is a concrete illustration of how the Michelin Performance and Responsibility approach is implemented on a daily basis in the Group’s sites.

Inaugurated in 1971, the Homburg plant manufactures semi-finished (elastomer compounds, metal cords) and finished products (truck tires) and possesses a large retreading unit. It employs more than 1,300 people.

Michelin Performance and Responsibility, a practical, concrete approachRespect for Customers means delivering products that satisfy expectations in terms of both availability and quality. At Homburg, quality is of paramount importance: all quality incidents are reported to the plant’s upper management and controls are uncompromising. However, in this respect, Homburg is no different from any other of the Group’s plants.

Respect for People at Homburg is applied and experienced daily in a wide variety of contexts and issues:

in each type of activity and group, and attention to safety is incorporated into every daily task. The concrete result of this ongoing preoccupation is a stabilized lost time injury frequency rate at one minor accident per year for the entire plant over the last three years;

is systematically carried out at Homburg, for example the canteen, both for Michelin employees and for employeesof external companies;

has been carried out to adapt a new machine to operation by women, leading to the hiring of a female operator at this workpost;

implemented at Homburg is that of shared participation in training. The operator donates one hour of his or her time per month for training paid by the Company; quality and safety at the workstation are the most frequent topics;

“collegial team” system organized around twelve instructors, each of whom manages a team of eight people; it is a fl exible and effective communication system;

90-minute meetings are attended each month by eight to ten people without their line managers; other more institutional tools are also used such as paper magazines, internal Group and site videos, posters;

module, which is part of the Michelin Manufacturing Way, is a powerful tool for the Respect of People and industrial

organization. Every day at each team changeover, it enables all the operators to exchange comments for fi ve minutes about the work carried out, safety and performance objectives. The meetings take place in a quiet area set aside for this purpose. In a single day over twenty meetings of this type take place in the plant.

Homburg is an MMW pilot siteIn light of the quality of implementation of Michelin Manufacturing Way principles by the Homburg plant, it was selected as a pilot site. Its mandate is as follows: help other sites implement MMW tools, by the exemplarity of its own effi cient use of these tools.

Just as it is open to the rest of the Group, Homburg is also open to its region, as is illustrated by several initiatives, such as the invitation to the mayors of the neighboring towns where its employees live.

Michelin values in practice at the Homburg plant

A training session at the workstation with a physiotherapist

An SMQDC meeting at Homburg

In 2004, the Homburg plant installed 30,000 solar

of indirect emissions of CO2 in 2008. In the same vein,13,000 fl uorescent light tubes were replaced by refl ector lights, thereby cutting their numbers by half.Energy is produced by a combined steam and electricpower generation system. Finally, 100% of the industrial waste related to manufacturing is recycled.

Improving our energy effi ciency

One of the most popular innovations of the Homburg plant was the recruitment of a part-time physiotherapist. She intervenes in two ways: fi rstly by going into the workshops and helping production workers correct their posture or carry out relaxation exercises and, secondly, by methodical training sessions that are held in a room adjoining the workshops. At the Homburg plant, 31% of sick leave was due to musculoskeletal disorders. Taking into account headcount and sick benefi t paid, the potential savings for this disorder

health insurance department provided fi nancial backing to the plant for this operation. Ergonomics is a win-win source of progress because improved health means less medical expenditure for everyone.

Learning the right movements at the workplace


4ST

AGE Tire commercialization and useProving performance

Once our sales teams have enabled our clients to select the best tire for their use, and our distribution channels have ensured timely delivery of the products requested, then begins the fourth stage in the tire’s life, its reason for being: use byour customers on their vehicles.The tire could be destined formany specifi c uses, but whether for

a passenger car, truck, two-wheeler, agricultural, earthmover vehicle or for an aircraft, there is one constant: this is the point at which the tire must prove performance, in real operating conditions. It is at this stage that it has the greatest impact on the environment, and that its qualities in terms of safety, durability and energy effi ciency will make all the difference.

MICHELIN Energy Saver passenger car tire and MICHELIN X EnergyTM SaverGreen truck tire launched in 2008, both new benchmarksin terms of energy effi ciency 22 new passenger car ranges launched in 2007-2008, launch of several new tires in agricultural, two-wheel and aircraft ranges 300,000 vehicles equipped by Michelin Fleet Solutions in 21 countries

Michelin received the Frost & Sullivan Customer Choice Award for Brand Offering 2007,in the “Safe and Durable Tires” and “Best Overall Tire Brand” categories

The European Union and the United Statesare making strides towards a tire classifi cationbased on energy effi ciency Opening of the 600th TyrePlus in China

New Holland tractor TM175equipped with MICHELIN Multibib tires

Respect

for

Customers

Respect

for

PeopleResp

ect for

ShareholdersResp

ect for

the Environment

Respect

for

Facts


TIRE COMMERCIALIZATION AND USE 4

53

Two major marketsMichelin sells tires in two types of markets:

here, our customers are manufacturers of cars, light trucks, trucks, agricultural or earthmover vehicles, aircraft, and two-wheelers. In 2008 this market accounted for 25% of tires sold for passenger cars and 30% for trucks.

with new tires on vehicles owned by private individuals or professionals. In 2008, this market accounted for 75% of tires sold for passenger cars and 70% for trucks.

Multiple distribution channelsIn the replacement market, we rely on various distribution channels for the sale of our tires: specialist dealers, car dealers,

A diverse portfolio of brandsThanks to our multibrand strategy we are able to provide a response adapted to the different expectations of our customers in our various markets. Our worldwide brand, Michelin, is complemented by BFGoodrich, a brand dedicated to sports products, as well as strong regional brands: Uniroyal in North America, Kleber in Europe and Warrior in China. The brands Riken and Kormoran, in Eastern Europe and Asia, offer customers who are particularly sensitive to the purchasing price an answer to their demand for a quality product at a lower cost. In the truck tire markets, retreaded tires are marketed under the Encore, Pneu Laurent, Remix and Recamic brand names.

(1) Top European Travel-Information Sites & Top European Travel Sites by Unique Visitors in Europe – Source: comScore Europe Metricx

Brands and distribution channels for a strong presence in the markets

auto centers, garages, service stations, national retailers and mass merchandisers.In order to maintain direct contact with our customers, we also have two integrated networks, Euromaster in Europe and TCI in the United States. They are leaders in their respective markets in terms of the quality of both the advice and the service they offer page 54 .

Accompanying travelIn addition to selling tires, Michelin offers customers travel assistance services such as Michelin OnWay for private users, or Michelin Fleet Solutions and Michelin Euro Assist for truck fleets. Our travel assistance website, ViaMichelin, Europe’s top travel information website (1), is enjoying growing success. We also offer comprehensive ranges of maps and guides as well as “brand extension products” under the Michelin Lifestyle brand name.

Michelin group brands

* Warrior under license

*

Première monteVente aux constructeurs(30% du volume)

Sales of new vehicles equipped with original tires

Aide

automobiles et deux roues Michelin Lifestyle

Constructeurs Original equipmentSales to manufacturers

Vente de pneus pour remplacer les pneus d’origine

Sales of tires to replace original equipment tires

ReplacementSales to distributors

Our three customer categories

Travel assistance

accessories for automobiles and two-wheels

Vehicle manufacturers

Distribution channels

merchandisers

Michelin distribution networks

Distributeurs de pneumatiques

Tire distributors

light trucks equipped with Michelin group tires worldwide

Michelin group tires

(Michelin estimates)

Consommateurs UtilisateursConsumer

Users

Distribution plays a major role in the relationship with our consumer users.


Michelin Selling Way, deploying our good practicesMichelin Selling Way (MSW) is the Group’s Marketing and Sales best practice referential. Its aim is to enhance customer service and commercial effectiveness through the development of Marketing and Sales professionals’ skills. Several subjects are already being covered, such as managing a commercial entity and developing a distribution policy. The question of fair pricing also requires substantial expertise; we have therefore grouped together and circulated our best practices so as to ensure operational excellence in this area.

Effi cient access to the marketFor numerous products (passenger car, two-wheeler tires, etc.) retailers constitute a special interface between Michelin and a product’s end user. It is essential that they be able to advise consumers on the best choice for a safe usage. In most of the world’s markets we work with a large variety of retailers (specialist dealers, vehicle manufacturers networks, auto centers, supermarkets). In the more mature markets our independent distributor network is complemented by an integrated network (Euromaster in Europe, TCI in the United States) that helps us to guarantee service quality and opens up access to certain large fl eets or other smaller retailers.

Developing our sales effi ciency and our distribution to better serve our Customers

In the Xian region, I manage a sales team which operates over a wide territory witha large number of customers.For us, MSW is an essential differentiating tool, enabling us to see rapid commercial results, while establishing a relationship of lasting trust with retailers. MSW offers very comprehensive and well-organized working methods and provides the keys to understanding markets and optimizing responses to retailer expectations.I can also follow the performance of my team, action plans and accompany each of them in a climate of trust. We have implemented effective solutions to confront questions needing attention. MSW was also useful in overcoming the psychological effects of the earthquake in 2008 and its impact on our activity.”

Jian Zuo, Area Sales Manager in China

“

In emerging markets, we are developing branded partnerships, often franchises, so as to accelerate the professionalization of distribution and offer consumers a buying experience with market standards that are comparable to those in more developed markets. This was the motivation for Michelin’s creating the TyrePlus brand.

Fast development of the TyrePlus networkIn May 2008, the first TyrePlus distribution center in India, in the southeastern state of Tamil Nadu was opened. This center sells MICHELIN, BFGoodrich and competitor brand tires, as well as associated services and automotive accessories. Michelin expects the opening of numerous TyrePlus outlets in India over the next few years. In June 2008, the fi rst TyrePlus distribution center was inaugurated in the Middle East, in Jeddah (Saudi Arabia). Michelin plans five further TyrePlus centers will open in the near future in Saudi Arabia, plus seven more in the Gulf states (the United Arab Emirates, Bahrain, Qatar, Oman, Kuwait). In September 2008, the international development of the TyrePlus network continued, with the opening of its fi rst store in Mexico.

In China, Michelin has inaugurated its 600th TyrePlus center, thus consolidating its position as leader in specialist distribution in this country.

Opening of a TyrePlus center in Yannawa, Thailand

1 Identifi cation of Priorities

2 Formalization of Best Practices

3 Updating Standards

4 Deployment5 Assessment

and Monitoring

1 2

3

4

5

MSW, a continuous

progress approach

Michelin Selling Way

with agricultural tire specialist retailers, Michelin contributed to enhancing the quality and level of service rendered to farmers. Michelin Exelagri is a distinction, the guaranteeof quality and professionalism, through which Michelin identifi es tire retailers who offer their technical expertise,a high level of service and personal advice to farmers within the framework of a lasting partnership. In this way,Michelin gives a concrete application of its commitmentto the agricultural sector and its willingness to accompanythe sector’s evolution. Michelin Exelagri currently totalsover 700 points of sale in 11 European countries.

Michelin Exelagri partnership: a confi rmed success

Internet as a direct means of access to the end customeris quickly expanding. Websites offering advice and on-line sales are often run by newcomers or physical retailers who are turning to e-commerce. More than 40% of European consumers perform internet searches on products before buying. In the United States, Costco, a major retailer chain, has chosen to team up with Michelin to develop its on-line sales website. This new

and light truck products and provides consumers with a host of useful information and tips on optimum vehicle fi tment. Since the site was launched in the United States and Canada, some two million customers have used it to compare product features and make the appropriate choice for their needs.

Selling our tires online


55

For our professional customers (passenger vehicle fleets, truck or earthmover businesses, airlines, etc), Michelin has put in place a large team of salespeople who are close to customers, aware of their needs and capable of explaining our technological progress. For our individual customers, we rely on several channels of communication and work closely with distributors to ensure our messages are relayed.

Individual customersOur brand is a market reference and, as such, we wish to help consumers make the best choice, one that is in line with their needs and budget. To this end, we follow the work carried out by public services on the type of information retailers should communicate to customers at point of sale, in particular in Europe and the United States.

The November 2008 European Commission’s Directive proposal is an answer to the authorities’ determination to encourage the industry to be more energy efficient and to enable customers to make informed decisions about their purchases based on knowledge of product performance. The major tire manufacturers share these aspirations.

To this end, the proposal comprises a label that will inform the consumer at point of sale. It will display fuel consumption, grip on wet surfaces – which has a bearing on safety – and external noise levels. The first phase of this regulation is due

to be implemented in 2012, thus contributing to reducing the CO2 emissions generated by cars. In the interest of safety, on-board tire pressure monitoring systems will be mandatory as of 2012. Meanwhile, in the United States, the Energy Bill (Energy Independence and Security Act) voted in 2007 should serve to raise consumer awareness in the same way. page 26 .

In 2007, in order to raise maximum public awareness, Michelin ran its Green Meter operation. In Paris, Shanghai, New York and Berlin, second by second, giant luminous meters displayed fuel savings obtained and CO2 emissions avoided thanks to MICHELIN Green tires since their launch in 1992. In sixteen years, over 600 million Michelin high energy efficiency tires have been sold worldwide and have already enabled an estimated saving of 11 billion liters of fuel, which means that the release of 28 million metric tons of CO2 into the atmosphere has been avoided (the amount of CO2 a billion trees can absorb in a year).

Professional customersRoad transportation companies also need information to properly equip their fleet, taken into account their specific constraints and needs, which depends on their activity vehicle types and usage conditions. In order to help customers make informed choices, Michelin has developed VAM (Valorisation des Avantages Michelin – Valuing Michelin’s Advantages). This calculation tool takes into account the main expense items

of a road transportation company: personnel expenses, vehicle management and maintenance, fuel and tires, insurance and taxes. It demonstrates to our customers why it is advantageous for them to equip their fleets with high energy efficient, long-lasting tires.

Keeping consumers up to speed on our progress

The draft labelwhich, as of 2012,is expected toinform European consumerson tire performances.

Bibendum, the Michelin Man,

explains energy savings.

In Shanghai, Paris, Berlin and New York, the green meter displayed savings made thanks

to MICHELIN Green X tires.


As the sole point of contact between the vehicle and the road, tires play the crucial role of carrying the vehicle’s load, steering the vehicle according to the driver’s choice, transmitting braking and acceleration forces, withstanding shocks and absorbing uneven road surfaces, while emitting as little noise and using as little energy as possible. To satisfy all these functions, tires must feature very diverse qualities: grip, durability, energy efficiency, endurance, precision steering and comfort. Simultaneous progress in these areas is a genuine technological challenge as they involve often conflicting physical and chemical properties. Our ambition is to improve constantly the overall performance of our tires, while maintaining the balance between these different characteristics.

Improving the energy efficiencyThe life cycle analysis of a passenger car tire see diagram below shows that over 86% of its environmental impact occur during its use phase, mainly due to rolling resistance. For trucks, this proportion reaches 93%. In regular usage, tires account for a important proportion of vehicle fuel consumption, currently estimated at 20% for passenger cars, over 30 % for trucks, and up to 50% for electric vehicles!

Worldwide, road transport represents 18% of CO2 emissions related to fossil fuel combustion, and tires are estimated to be responsible for approximately 4% of these emissions. Therefore, reducing tire rolling resistance – in other words, increasing tire energy efficiency – is a key factor in reducing transport-related CO2 emissions and energy needs.

What is rolling resistance?As the wheel revolves, the

shape of the tire is deformed when making contact with the road. The viscoelastic materials used in tires then dissipate part of the propulsion energy in the form of heat, thus creating rolling resistance.

A tire’s rolling resistance coeff ic ient is h ighly dependent on the compo- s i t ion of i t s rubber compounds , and i s expressed in kilograms per metric ton. A coefficient of

12 kg/t means that, so as not to lose speed due to the effect of rolling resistance, a car weighing one metric ton must use the same energy as needed to climb a 1.2% incline.

A technological breakthrough thanks to silicaFor many years it was impossible to lower rolling resistance without compromising grip. In the 1990s, Michelin made a technological breakthrough by partially replacing the carbon black of the tread with silica, thus altering the viscoelastic behavior of the rubber compounds and enabling formerly conflicting performances to be reconciled. The MICHELIN Energy tire, launched in 1992, demonstrated that it was possible to increase tire energy efficiency without adverse effect on grip or durability.

Rolling resistance reduced threefoldSince the introduction of the first pneumatic car tires, the rolling resistance coefficient has been reduced almost threefold! In 1895 tires had an average coefficient of 25 kilograms per metric ton; the technologies developed by Michelin have enabled us to currently produce car tires with a coefficient of 9 kg/t.

Fuel savings made thanks to reductions in rolling resistance have been significant. On a global level, if all cars equipped with standard tires changed to MICHELIN Energy tires, 20 million

A technological challenge: balancing the tire’s performances

MICHELIN X EnergyTM SaverGreen truck tire

Fossil fuel consumption and CO2 emissions Tire debris Others (1)

Distribution of impacts of an average European passenger car tire throughout its life cycle(as a percentage of total impact)

0 20 40 60 10080

Production of raw materials and energy

Tire manufacture

Transport *

Use

End-of-life processing

*Transport of new tires and end-of-life tire collection. (1) Other LCA criteria, such as land use, ore consumption, emissions of carcinogenic substances, acidifiers or eutrophicating substances, etc. Based on a study carried out by PRé Consultants B.V. in 2001.

Evolution of the rolling resistance coefficient(in kg/t)

First Metalic tires

First radial tires

First radialtires

First Green tires Energy 3A

XDA

XDA2 Energy 3EnergyTM SaverGreen

Energy Saver

19601940 20001980 20201930

20

15

10

5

0

Car tiresTruck tiresUnderground railway tiresRailway wheels


tireline reference tireline wear safety grip Rolling resistance

P rimacy Alpin P A3 P ILOT ALP IN P A2 H 100 110 107AGILIS 2 Agilis 81,61 115 110 110

E nergy S aver E nergy E 3A 95 115 105P ilot Sport A/S P lus P ilot S port A/S 115 107,5 102,5

57

metric tons of oil equivalent, which represents France’s annual consumption, could be saved each year, meaning the emission of 60 million metric tons of CO2 would be avoided.

In 2008, another breakthrough was made with the launch of MICHELIN Energy Saver passenger car tire and MICHELIN X EnergyTM SaverGreen truck tire.

Ongoing progress in our product rangesGrip, durability and energy efficiency are essential among a tire’s performances. We have made overall progress in these three areas in our new ranges introduced in 2007 and 2008 see graph . In the Passenger car and light truck market, signifi cant progress has been made in 17 out of 22 ranges in terms of grip, 7 ranges in terms of energy effi ciency and 3 in terms of durability, without overall performance being compromised.

Quiet, please, we’re driving!The increasing volume of road traffic has given rise to a growing need to reduce noise pollution. The noise made by a passing vehicle is essentially the result of its engine and the contact between the tire and the road. At stable speeds, the tire-road contact noise becomes dominant at 40 kphfor passenger cars and 50 to 60 kph for trucks.

The noise made by road vehicles and tires is regulated in Europe by two directives (1). Other countries apply two very similar United Nations regulations (2). All our tires comply with these directives and regulations. For several years, our Technology Center has improved the grip, durability and energy effi ciency of our tires without compromising on acoustic performance.

The type of road surface is also a decisive factor. While the noise level of a given vehicle and speed can vary by 5 dB(A) depending on the tire, it can vary by 10 dB(A) depending on the road. This

Progress made with our ranges launched in 2007-2008(base 100 compared with the range replaced)

Grip Energy effi ciency DurabilityBase 100

120

115

110

105

95Primacy

Alpin PA3PilotAlpin PA2 H

Agilis 2

Agilis 81, Agilis 61

New range

Previousrange

Energy Saver

Energy E3A

Pilot SportA/S Plus

Pilot SportA/S

MICHELIN Energy Saver passenger car tire

issue gives rise to regular meetings with road builders, particularly in the framework of the ADAC (Allgemeiner Deutscher Automobil-Club) and the PIARC (World Road Association).

(1) Directives 92/97/EEC and 2001/43/EC(2) UNECE Regulations R51 and R117

Michelin has been an active participant in the studies carried out since 2007 within the Tire Industry

together the 11 tire manufacturers who are members of the WBCSD, under the personal guidance of their top executive. The aim is to characterize tire debris and analyze their potential impacts on the environment and on health. In particular, Michelin

diversify the tests’ operating conditions and bolster the reliability of the particle recovery and characterization equipment for fi ne particles with a diameter of less than 10 microns.

To fi nd out more, visit www.wbcsd.org

Tire debris: limited impacts,


manufacturers to decrease by 20 grams per km the average level of CO2 emissions across their product ranges, from 140 g/km in 2008 to 120 g/km in 2012. With this technology, Michelin is able to offer manufacturers a preferential solution for their specifi c “low CO2 emissions” label.

MICHELIN Energy Saver was designed with a view to equipping most cars on the market, from city cars to mini-vans , including sedans and coupes. Launched on a Peugeot 308 after four years of collaborative development, MICHELIN Energy Saver now equips other models widely available in Europe. In the replacement market, MICHELIN Energy Saver is sold at the same price as its predecessor, enabling consumers to benefi t from the savings and improved environmental performance of the new tire at no additional cost.

(1) ISO Test conducted by TÜV SÜD Automotive in 2007 on the 195/65 R 15 and 205/55 R 16 sizes. Tires tested include the six leading manufacturers and were purchased in the market.

Innovating to meet expectations in the personal users marketFaced with changing mobility needs, increasing environmental concerns and car manufacturers’ questfor economic balance, the automotive market has tosatisfy growing demands. We seek to meet these new demands by steadily increasing the performance of our tires, taking into account the varying uses and expectationsof our customers.

Anticipating evolving needsIn an uncertain economic climate, our customers’ expectations are liable to change quickly and it is essentiel that we anticipate their new needs. To this end, Michelin uses effective tools, such as customer surveys and Customer Value Analysis (CVA) studies, which are conducted by specialized institutes among passenger car tire distributors.

The latest studies show that consumers’ principal concerns are improved safety, driving comfort and reduced vehicle use costs, while respecting the environment. Today they have a greater awareness of the role tires play in fuel consumption.

These studies also show that expectations vary from one geo-graphical zone to another: in Japan, consumers are particularly sensitive to comfort and the absence of noise inside their car; in North America users place importance on versatile “all season” tires; for Europeans road handling is key; and consumers in emerging countries want a robust product offering durability.

Nonetheless, safety remains the number one expectation all over the world.

Energy Saver: a saving of 4 g of CO2 per kmLaunched at the end of 2007 in the original equipment market, and in the fi rst quarter of 2008 in the replacement market, MICHELIN Energy Saver range, fourth generation of MICHELIN Green tires, has broken new ground in the pursuit for energy effi ciency.

By decreasing rolling resistance by a further 20%, MICHELIN Energy Saver economizes 0.2 liters of fuel per

100 km, or almost 2 euros for every full tank (2008), while maintaining

exceptional performance in terms of durability and grip. The tire thus emits 4 grams less CO2 for each kilometer covered (1). That represents 20% of the objective set by the European Commiss ion for automobi le

Robustness Grip on wet surfaces Road handling Durability Energy

Effi ciencyAcousticcomfort

Europe ´ ́́ ́ ́́ ́ ́́ ́́ ´

North America ́́ ´ ´ ́́ ́ ´ ́́

Japan ´ ´ ´ ´ ́́ ́ ́́ ́

Asia ́́ ́ ´ ´ ́́ ´ ́́

South America ́́ ́ ́́ ´ ́́ ́ ´ ´

Africa and Middle East ́́ ́ ´ ´ ́́ ́ ´ ´

Passenger car and light truck market expectations, by geographical zone

Segment MICHELIN range Size Energy effi ciency

positionDurability position

Mid-range Energy Saver 195/65 R 15 H + 20% + 38%

Performance Energy Saver 205/55 R 16 V + 24% + 60%

Winter Alpin A3 195/65 R 15 T + 11% + 50%

Winter Performance Primacy Alpin PA3 205/55 R 16 H + 22% + 35%

High Performance Primacy HP 205/55 R 16 V + 9% + 34%

Sport Pilot Sport PS2 245/40 R 18 Y + 7% + 21%

Winter High Performance Pilot Alpin PA3 245/40 R 18 V + 11% + 23%

Light truck Agilis 195/65 R 16 C + 2% + 47%

RecreationalAll Terrain Latitude Cross 245/70 R 16 T + 10% + 24%

For each segment studied in 2008, the most recent Michelin range is compared to a panel representative of our European competitive environment, made up of fi ve to eight tires of different brands. The size studied is one of the best-selling sizes in each segment. The tests were carried out by independent bodies (such as German and Czech TÜV Sud Automotive or DEKRA in France).The test results of competitors’ tires were subjected to an arithmetic average. In the case of durability, the MICHELIN offer was directly compared to this average. Energy effi ciency ranking was calculated on the basis of the results of rolling resistance measurements: if the MICHELIN tire had a rolling resistance of 8 kg/t compared to an average of 10 kg/t for the competitors, the energy effi ciency of MICHELIN tires was considered to be superior by (10-8)/8 = +25%.

Positioning of Michelin European ranges in energy effi ciency and durability compared to the average offer among the competition

MICHELINLTX A/T2

North Americanpassenger car tire


59

MICHELIN Green X: the new mark for energy-effi cient tiresIn order to facilitate the identifi cation of Michelin high energy effi cient tires, we put a “Green X” mark on their sidewalls.For each tire size and market segment the mark indicates those tires whose rolling resistance coefficient is among the best on the market and which therefore offer greater energy efficiency. Our ambition is that the majority of MICHELIN passenger car tire ranges carry the Green X mark,

while maintaining a logic of differentiation according to each market segment. Furthermore, we support the implementation of energy efficiency indicators for tires in Europe and theUnited States page 55 .

Performances recognized through numerous testsMichelin received the Frost & Sullivan Customer Choice Award for Brand Offering 2007, in the categories “Safe and Durable

Tires” and “Best Overall Tire Brand”. This recognition is the result of a study entitled Consumer Attitudes and Perceptions towards Road Handling, and demonstrates that the Michelin group is considered by consumers to be Europe’s most innovating tire manufacturer.

Several of our Passenger car and light truck tires have also received awards from independent bodies:

TÜV SÜD Automotive award for both safe braking on wet surfaces and fuel saving, and of the Tire Technology of the Year

prize, awarded by an international jury of specialists and professionals from the tire industry, engineers and academics from across the globe;

magazine Auto Plus in 2007;

2006 and 2007, performance equally recognized by AutoBild, O.A.M.T.C. and Stiftung Warentest;

Auto Zeitung;

1st prize Za Rulem.

To launch MICHELIN Green X rangesin the United States in 2009

Progress objective

The new MICHELIN Green X mark

Testing the MICHELIN Primacy tire on a wet surface in Ladoux, France

Testing the MICHELIN X-Ice North 2 tire in Finland:grip is here a crucial quality to ensure safety.

For customers, the cost of ownership of a product is not simply its purchase price. Indeed, tire rolling resistance contributes to fuel consumption, of up to around 20% for a car and 30% for a truck page 56 . The price of this fuel should therefore be added to the initial purchase price. This overall expenditure, applied to the number of kilometers driven, gives the true picture of a tire’s economic performance: this is the notion of Total Cost of Ownership. In late August 2008, the French magazine Auto

published the results of a test on the wear resistance and fuel economy

the following comment: “The bill is slightly higher initially, but over time, it is more economical.”

MICHELIN Energy Saver offers best cost of ownership


Responding to the challenges of sustainable development facing our professional customersIncreasing fuel prices, anti-pollution norms, the fight against climate change… today’s players in the road transport companies are confronted with some major challenges, in a highly competitive context.

Strategic capital goodsIn this climate, more than ever, truck tires are proving to be strategic capital goods. Fuel at the current price accounts for 25% to 30% of the operating costs of a truck – up to 50% in China. And a 20% reduction in tire rolling resistance can bring down fuel consumption by 6% and the overall budget by 1%: a significant saving for an industry whose average operating margin only reaches 2% to 3%.

The durability of tires, as well as their capacity to be retreaded, are other fundamental performances, both in terms of economic impact and environmental consequences: when tires last longer, their cost per mile traveled decreases and fewer end-of-life tires need to be recovered.

This is why Michelin is committed to providing its customers in the transportation industry with solutions that will allow them to reduce the overall cost of ownership of their tires while respecting the environment.

Michelin Durable Technologies – a revolutionMichelin Durable Technologies is an ensemble of patented innovations in tire tread design and architecture, offering unprecedented performances and responding to the productivity, safety and environmental challenges facing the road transportation sector:

grip. The Michelin Durable Technologies self-regenerating tread pattern features sipes with cylindrical, raindrop shaped grooves that create new channels when the tread is two-thirds worn. As a result, the tire recovers up to 30% grip!

makes them more rigid, thereby improving the tire’s mileage and wear resistance by 25%.

wrapped beneath the tread, reinforcing rigidity and toughness. This technology makes it possible to develop different tires, wider and possibly with reduced diameters, which translates into several advantages:- tire durability is increased by up to 50%;- capacity is increased by up to 400 kg (880 lbs) per axle on tires with reduced diameter, providing increased loading volume;

For over 28 years, Dillon Transporthas been respected as an unrivalled leader in the asphalt transportation industrywith a fleet of 160 Peterbilt trucks.Our commitment to the Michelin X One program has contributed greatly to our success. In utilizing the X One tires,we were able to haul over 800 more pounds per truck to our customers,generating an additional $350,000in revenue in 2007. In addition, weconsistently have seen an increaseof 4% in fuel efficiency resultingin a $300,000 reduction in fuel costs. And on top of these financial achieve-ments, because of having MICHELIN X One as an integral component in our fleet, we have achieved logo use status as a partner with Smartway EPA initiative!”

Charles Musgrove, Vice President, Dillon Transport Inc., Burr Ridge, Illinois, United States

“Michelin Durable Technologies Sales(base 100 in 2006)

2005 2006 2007 2008

100

200

300

400

500

Michelin Durable Technologies Europe Michelin Durable Technologies North America

- up to 130 kg extra payload per drive axle thanks to the lighter weight of a MICHELIN X One tire compared to a twin-mount.

A wider tire for extra payloadThanks to Infinicoil technology, the wide MICHELIN X One tire replaces classic twin-mount tires for drive and non-drive axles. With a saving of up to 600 kg for a complete North American tandem tractor trailer configuration, MICHELIN X One significantly increases the payload capacity and profitability of each load by saving around 5% more fuel than MICHELIN Energy twin-mounts and requiring fewer raw materials for their manufacturing.

Major innovations in 2007 and 2008 Since the MICHELIN XDN 2 Grip, which was in 2005 the first tire to benefit from the Michelin Durable Technologies in Europe, we have enhanced our offer by integrating new technological innovations and launching new products. Designed for trailers and semi-trailers, the MICHELIN X One MaxiTrailer tire was launched in Europe in 2007 and boasts a lifespan up to 50% longer and a greater load capacity than its predecessor.

MICHELIN X One presented to a customer


61

The first use of Michelin Durable Technologies for steering axles, the MICHELIN X Energy 315/60 R 22.5 XF, offers a load-bearing capacity of 7.5 metric tons per axle, 7% lower rolling resistance than its predecessor and a 5% improved grip.

In 2008, we developed the EnergyTM Flex heat-stable casing, which contributes to the remarkable energy-efficiency perfor-mances of the new MICHELIN X EnergyTM SaverGreen tire.

The MICHELIN X MultiWay tire, also launched in 2008, is even more versatile thanks to more stress resistant rubber com-pounds, a new anti-stone trapping tread pattern, exceptional grip and up to 30% extra mileage.

Cost and environmental benefits of the truck tire’s four livesThanks to regrooving and retreading, it is possible to take advantage of the maximum durability potential of MICHELIN truck tires, with only moderate requirements for raw materials and reduced additional costs. The principle is simple: at the end of its first life, the worn tread of the tire is regrooved with a heated grooving tool that makes it as good as new in

terms of grip and offers a second life. Right from the design phase, Michelin provides for a sufficient thickness of rubber so that a quality regrooving can be performed, without the product’s toughness being altered. Regrooving gives the tire an extra 25% potential mileage and, compared to re-equipping with new tires, represents an average fuel saving of around 1.4 liters/100 km and up to 2 l/100 km for a tractor/semi-trailer combination used for long haulage.

Once the regrooved tire has also worn down, it can be retreaded for a third life. After being checked and prepared, the casings are given a new tread and new sidewalls. The reconstructed tire is then cured in a mold, where it is given its final tread pat-tern, and then undergoes quality checking. The Michelin RemiX retreading process guarantees performance levels identical to those of a new tire.

When the new tread is eventually worn down, the tire can again be regrooved and thus begins its fourth life.

In all, this process means that new tires can last 2.5 times longer for an additional cost of 60% and with only 25% additional raw materials needed, as regrooving requires no further materials.

This also leads to fewer end-of-life tires to be processed. In short, it is a genuine win-win process. Michelin can thus offer to road transportation professionals a solution that meets their expectations in terms of profitability, safety and environmental friendliness. The Michelin group is the main actor in the global retreading market with a 15% share of the market, which represents around 50% of the replacement market in volume.

Our customers’ main concerns are reducing costs, monitoring fuel consumption and environmental issues.In 2008, we brought our Optifuel offer to the world market. This product was devised to further improvethe fuel savings offered by new-generation vehicles and uses MICHELIN X EnergyTM SaverGreen tires. Michelin made an environmental breakthrough with this new tire,a fact that is acknowledged and appreciated by our customers, as well as our development teams. I am happy to say that the teamwork between Michelin and Renault Trucks has been constant and fruitful, from the design phase to the arrival of the products on the market. Thanks to software provided by Michelin, our sales teams can calculate fuel or CO2 savings. And they are real! The measurements demonstrate this: 600 liters of fuel per year for 150,000 km traveled, i.e. 1.5 metric tons of CO2 that have avoided being released into the atmosphere!”

Jean-Pascal Vielfaure, Marketing Director, Renault Trucks, Volvo Group

“MICHELIN X MultiWay truck tire


“Michelin Fleet Solutions enables us to promote the competitive edge of our tires by offering a broader tire management service. Optimizing product performance and durability is in the interests of all: customers, Michelin and the environment. In this sense, it genuinely is a model of Sustainable Development.”

Stéphane Mamelle, Head of the Fleet Management Program.

The Michelin Fleet Solutions offer is designed for large fl eets of at least 200 trucks or buses, which are willing to transfer to Michelin the management of their tires. This service is based on an original business model: in most cases, instead of buying tires, our customers purchase travel mileage.

The concept originated in France and the United Kingdom in the 1920s. Motor vehicle fleets were used in France for testing new tires. Michelin’s technicians dismounted and remounted tires on a regular basis to monitor the wear of tires and provide useful technical feedback to our Research Center. To ensure that these frequent interventions interfered as little as possible with the customer’s business, Michelin remained the owner of the tires, which technicians would replace if need be, and only usage would be invoiced. In the United Kingdom,

in a context of rubber shortage, Michelin also offered bus companies to invoice its tires on the basis of mileage traveled.

Today, Michelin has transformed this concept into a full service offer and taken the model to the rest of Europe and North America.

An all-inclusive service

In concrete terms, once the contract has been signed, Michelin looks after everything: from tire selection and supply, stock management, organization of maintenance, replacement and management of end-of-life tires, to administration, reporting, and coordinating between the customer’s different bases.

In the fi eld, these tasks are entrusted to specialized Michelin technicians or carefully selected and trained Specialist Dealer partners. Michelin remains in charge of quality control of the services, as it is essential that tire pressure remain at an optimum level, that tires be regrooved then retreaded when appropriate and that the casings be recovered in compliance with the most stringent local regulations.

Invoicing is straightforward: based on a rate agreed for each type of vehicle, Michelin invoices the number of miles traveled. A contract is entered into by the parties for a period of 3 to 6 years. As such, each party is committed on a long-term basis.

Customers optimize their resources

The Michelin Fleet Solutions service offers customers numerous advantages, which translates into real savings:

scheduled so as to limit the vehicle’s downtime; constant monitoring of tires significantly decreases the number of breakdowns and increases transport safety;

specifi ed by its designers, the tire actually reaches its optimum fuel-saving potential;

35% of the vehicle’s total fuel consumption, the importance of the right choice of tire and a good maintenance service is clear: certain customers make a fuel saving of 2% to 6%, roughly equivalent to their tire purchase budget!

become variable costs dependent on activity and thus allow better budget control;

customers can focus on their core business, while being sure that they are optimizing tire-related costs.

With a fl eet of 7,000 buses and coaches, Stagecoach Group, a Michelin Fleet Solutions customer, is one of the United Kingdom’s largest coach operators.

We are a very old customer of Michelin, and we have known the quality of their products for over 30 years. We entered into a Michelin Fleet Solutions contract in 2002. Since then, our relationship has become a real partnership, benefi cial to both parties. One of the advantages for us is that Michelin knows the transport sector well and therefore we benefi t from their experience in safety and maintenance.”

Víctor Manuel López Menéndez, Director of purchasing and maintenance of Alsa, the leading passenger transport company in Spain with over 2,300 vehicles.

“

Michelin Fleet Solutions: reinventing our relationship with our customers, optimizing tire life

In a survey carried out in May 2008 and submitted to ADEME, a French governmental agency for the environment and

Solutions model. This survey found that “environmental savings made overwhelmingly outweigh any disadvantages,

that “Michelin Fleet Solutions has the advantage of being totally integrated […] and enables customers to simplify and to spread out costs. The solution is perceived as a success by industry players.”

Michelin Fleet Solutions


63

Customer relations: Michelin stands out from the crowdFrom Michelin’s standpoint, this offer is the best way to take full advantage of the technical edge its products embody and to capitalize on its commitment to Service (Retreading, Distribution). Michelin thus moves the competitive fi eld into an arena where its advantages are fully exploited.

The Michelin Fleet Solutions offer also enables Michelin to develop its relationships with its customer users. By being physically present on our customers’ premises, we are able to monitor and optimize the same performance indicators as them. We are no longer merely suppliers, but real partners.

Our relations with our distribution partners are also reinforced. They do not always have access to such customer segments and, by our side, are able to enhance their services know-how.

A proven drop in CO2 emissionsAt the “Grenelle de l’Environnement” round table organized by the French government in June 2008, Michelin demonstrated that for a given fl eet of buses, this service allowed a saving of 126 liters of fuel and enabled 330 kg of CO2 emissions to be avoided per year per bus, thanks to retreading, in particular. A survey by Ernst & Young confi rmed this environmental benefi t see feature .

Replacing products with servicesAlmost a century after its creation, the Michelin Fleet Solutions offer now corresponds to a model called “functional based economy”. Here, the interests of all parties converge toward increased product lifespan. This common interest prompts us to come out of a quantitative logic and to go toward the sale of know-how and a service rather than goods.

To achieve this result, a highly effi cient organization must be implemented, one that enables us to manage the tires of over 300,000 vehicles, and coordinate the 800-strong Michelin staff dedicated to this activity and the 3,500 partners. Many years of work were necessary in order to build processes and information systems, organize service continuity and reach the quality levels that are expected by our customers and necessary for the provision of the service.

An exemplary model for sustainable economyThe Michelin Fleet Solutions model pushes for product lifespan to be prolonged as far as possible. It reduces fuel-related expenses as well as emissions of conventional pollutants and greenhouse gases; it guarantees the recovery of end-of-life tires and contributes to greater safety and improved availability of vehicles: it really is a model for sustainable economy!

Building on our experience in Europe and North America, we are now working towards extending our offer to new continents and other market segments, and severalexperiments are currently underway.

SITA truck, Michelin Fleet Solutions customer

Michelin Fleet Solutions Key Figures

280 million in sales in 2008

Checking an Airbus’ tires and landing gear

The functional economy, which consists of selling the service rendered by the product rather than the product itself, also exists for other tire categories. In the aviation industry, several forms of sale are practised. First, there is the simple tire sale, which mainly applies to private aviation. The second type involves tire sale with retreading: the manufacturer recovers worn tires and retreads them. At a more integrated level, the manufacturer manages tire supply for its customer and in-voices customers per tire, whether new or retreaded. In the most comprehensive option, the manufacturer, such as Michelin, supplies new tires, manages tire stock and retreading, but invoices per landing as opposed to per tire, thus following the Michelin Fleet Solutions model.

Aircraft tires: a business modeltailored to customers


Whether equipment for professional use, like aircraft, agricultural machinery, specialty earthmover equipment, or tires for personal use like two wheelers, our specialty ranges share with Passenger car and truck tires the same pursuit for responsible performance.

The very specific technical characteristics required to meet customers’ needs or contribute toward the performance of their activity call upon specialized technology. For example, aircraft tire research is geared toward reduced mass and top-level safety, whereas with agricultural tires the accent is placed on soil preservation and reduced fuel consumption. In the two-wheel ranges, motorcycle tires are particularly concerned with grip and safety, bicycles tires with comfort and energy effi ciency. And fi nally, low fuel consumption and durability are key qualities for earthmover tires.

Certain uses lend themselves to invoicing based on services rendered rather than on tire purchase. For aircraft tires, this means the number of landings, and for large mining earthmover equipment, the number of tons transported per kilometer.

Last but not least, although specialty product ranges account for 14% of Group net sales, they contribute to 45% of operating income.

Below we have highlighted several achievements and special events symbolic of recent progress made in these specific product ranges for which technological advance and innovation are basic factors in satisfying customers’ needs.

AircraftMichelin to equip Emirates Airline’s Airbus A380 Michelin has entered into a 10-year agreement with Emirates Airline to equip its Airbus A380 fl eet in latest-generation radial technology tires. Thanks to their excellent resistance to shock and stress, these tires enable 30% to 40% more landings per tire than traditional bias tires. They also permit a reduction in the total mass of the plane, which leads to a significant decrease in fuel consumption. Michelin will be the sole tire supplier for these aircrafts, whose delivery is scheduled over the period from July 2008 to June 2013. Emirates Airline has ordered 58 aircraft, meaning it will operate the world’s largest A380 fl eet.

Michelin equips the Sukhoi Superjet 100 In May 2008, Michelin and the Russian aircraft manufacturer Sukhoi signed a contract concerning original equipment on the new regional civil Superjet 100. Michelin is currently the only radial tire supplier for this aircraft, presented as the future hope of the Russian civil aeronautics industry. Sukhoi hopes

to sell 800 of these planes by 2024, 300 in Russia and 500 to western airline companies.

AgriculturalMICHELIN Ultrafl ex for better soil preservationWith Ultraflex, Michelin rises to the challenges of both soil preservation and productivity. Ultrafl ex technology, the result of over four years’ research at Michelin, enables not only the protection of agronomic soil capital thanks to a 25 to 50% reduction in tread depth, but also better farm productivity: up to 9% fuel reduction and 2 to 4% time savings thanks to 10 to 30% traction improvement. Production per hectare is increased by about 1.5%. Two tires using Ultrafl ex technology are currently available, MICHELIN XeoBib and MICHELIN AxioBib.

MICHELIN OmniBib: productivity, respect for agricultural lands and lower fuel consumptionThe new MICHELIN OmniBib tire improves farm productivity while better preserving soil. Thanks to a larger contact patch the fi rst 70 series wide Michelin branded tire brings better traction and lower soil compaction. It delivers fuel savings and enhanced work pace, as well as the best durability in its category. It is mostly intended for 70 to 180 HP tractors used for “mixed and livestock farming”. The MICHELIN series 70 OmniBib tire is homologated by the main tractor manufacturers.

Michelin equips Emirates Airline Airbus A380 with NZG (Near Zero Growth) technology tires.

Soil compacting comparison between standard tire and MICHELIN Ultrafl ex technology

Regional transportation aircraft Sukhoi Superjet 100 on MICHELIN Air X radials

The durable performance of our Specialty tires


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Two-wheelsMotorcycle tires: from competition to roadFor many years Michelin has passed on cutting edge technology developed in motorcycle competition to standard tires, with priority toward the high tech radial road segment. This strategy is bearing fruit, as in 2008, like over the past three years, MICHELIN Pilot Power and MICHELIN Pilot Road 2 tires came first in tests organized by recognized European motorcycle magazines: Motorrad (Germany) and Moto Revue (France) for MICHELIN Pilot Road 2, and Moto Magazine (France) for MICHELIN Pilot Power.

Grip and low rolling resistance – for bikes too!At the Eurobike show in September 2008, held in Friedrichshafen, Germany, Michelin presented its new ranges of bicycle tires, MICHELIN Pro3 for enthusiasts in pursuit of performance, and MICHELIN City Trekking for city dwellers who use a bicycle as a means of transport. Available in ten color variations, the MICHELIN Pro 3 offers 27% extra grip when cornering compared with its predecessor, yet ensures low rolling resistance for a mass of only 200 grams. There also, safety, lightweight and high energy efficiency are Michelin’s performance goals for an environmentally friendly means of transport.

EarthmoverIn the port of Tanjung Pelepas, Malaysia,Fuel savings of 8%!

Fuel can account for up to 30% of freight handling costs in a port. In April 2008, a Michelin team organized for a customer, the port of Tanjung Pelepas in Malaysia, two tests in order to demonstrate that over and above the performances of durability and robustness, Michelin product ranges could bring about substantial fuel savings.

First test: a vehicle fitted with MICHELIN X Terminal T tires and a vehicle equipped with competition tires (bias tires on the tractor unit, solid tires on the trailer) carry out several transportation cycles, both empty and loaded. Total fuel consumption is measured.

Second test: the two vehicles run side by side and select neutral gear at the same time. Distance covered until the vehicles come to a standstill is measured.

Result of the two tests: 8% fuel savings thanks to MICHELIN X Terminal T tires. For the port of Tanjung Pelepas this means a reduction in fuel consumption of 300,000 litres per year! This gain benefits the environment too: lower fuel consumption means fewer CO2 emissions.

Michelin meets with customers at MINExpoMINExpo, the mining industry’s largest international trade fair, was held in Las Vegas (United States) in September 2008. The theme of Michelin’s stand was our commitment to our customers: “Michelin is by your side”. This policy translates into our products and services, which enable our customers to optimize their productivity. It also reflects in the priority we give to our commitment to minimize our impact on the environment, to safety, and to investment in new capacities to meet the needs of our markets.

On February 26, 2008 President Luiz Inácio Lula da Silva inaugurated the Campo Grande Earthmover tire plant in Rio de Janeiro, Brazil

Motorcycle test on wet road surface

Michelin technician carrying out a tire inspection on underground mine loader,

Örebro Län, SwedenPh

oto:

Ric

ardo

Mal

ta


COM 2008/316 will make it compulsory for vehicles registered in Europe to be equipped with a TPMS.

Even in surface miningMEMS (Michelin Earthmover Management System), presented by Michelin at the Las Vegas MINExpo in September 2008, is currently the only Earthmover tire management system available and operational worldwide.

In Africa, since June 2008, five rigid dumpers operating in the Venetia Mine, which belongs to the De Beers/Anglo American Group, have been equipped with MEMS technology. Specifically designed for high-capacity vehicles equipped with the largest tires and working in surface mines, MEMS enables remote monitoring of tire pressure and temperature in real-time, without the vehicle having to stop. This represents a precious saving of time on this type of vehicle, whose tires need to be checked at least every 24 hours. The Venetia Mine is the second mine in the world to be equipped with this technology.

at risk of sudden destruction. Since the first Fill up with air campaign in 2005, we have checked more than 260,000 tires.

To facilitate monitoring of tire pressure, we are also contributing by making tire inflation facilities available to the public, free of charge, on French highways and our industrial sites: by the end of 2008, 81 Bibendum Gonfleurs (tire inflation equipment in the shape of Bibendum, the Michelin Man) had been installed, some in partnership with ASF and Cofiroute companies.

Finally, under our MICHELIN brand via the Michelin Lifestyle structure, we market pressure-checking devices, air compressors, foot pumps and easy- and practical-to-use tire pumps.

Michelin in favor of on-board warning systemsIn addition to these efforts to increase customer awareness, Michelin advocates the development and more widespread use of on-board warning systems or TPMS (Tire Pressure Monitoring Systems), which inform the driver in real time that a tire is under-inflated by means of a warning on the dashboard. The Michelin group has thus contributed to developing systems tailored to each vehicle category. As of 2012, the EU regulation

Tires play an essential role in safe road travel. In addition to working on innovations to offer increasingly safe products, we are also raising drivers’ awareness of the importance of correct tire pressure and, more generally, encouraging driver behavior that helps make roads safer.

Combatting the dangers of under-inflationIn Europe, 153,000 accidents per year and 6% of fatal road accidents are attributed to worn or under-inflated tires. Yet too many motorists continue to drive with under-inflated tires. This is why since 1985 Michelin has been carrying out Fill up with air operations, the aim of which is to raise driver awareness of the importance of monitoring tire pressure and the general condition of their tires.

During the 2008 campaign, which was conducted in ten European Union states, as well as in Norway, Turkey and Kuwait, Michelin offered tire pressure checking and inflation free of charge for several thousand vehicles. Over 60% of cars were running on under-inflated tires and in 40% of cases tires were so under-inflated (by more than 0.5 bar) that they were

Safe driving begins with correct tire pressure!

Tire pressure monitoring campaign in Beijing, China MEMS used in a surface mine in Los Pelambres, Chile

Very dangerous 8.8% Dangerous 29.1% Temporarily acceptable 23.0% Correct 28.8% Over-inflated 10.3%

Tire under-inflation rate for passenger carsUnder-inflation rate measured in 2008 on 9,535 vehicles.


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As a road expert, Michelin is keen to look beyond the role tires play in vehicle safety and to contribute to improving road safety worldwide.

A continuous commitmentThe Michelin group intends to directly address road users through awareness, education and training campaigns aimed at changing dangerous road behavior. In 2008, our Road Safety project reached European level, and it is our aim to implement it throughout the whole Group. In 2009, Michelin is due to renew its adherence to the European Road Safety Charter, originally signed in 2004, which is testament to the ongoing commitment of our policy in this area.

Michelin acts at two levels: locally, around our sites, through our initiatives to get involved in local community life; and at a governmental level, in collaboration with other bodies.

Numerous achievements in the fi eldWe are of course trying to raise awareness of the essential role played by tire pressure. But beyond that, we are also implementing specific initiatives, appropriate to each local context, regarding, for example, wearing helmets and the issue of alcohol, and we wish to reach the most vulnerable sections of society: young people, cyclists and pedestrians.

For schoolchildren, Michelin has implemented a program called The safest way in several countries, for example in Brazil –

Na pista do melhor Caminho – and in Fossano (Italy) inpartnership with the local council. Michelin Junior Bike is an initiative focusing on helping young people learn road rules in a fun way. In 2008, eight such campaigns were held in Italy and four in France, involving more than 7,000 young people between ages 8 and 12. Since 1998, in Italy alone, over 184,000 children have participated in the event. For adolescents, the main danger comes from driving two-wheelers, so Michelinorganizes campaigns to raise awareness about wearinga helmet, in particular in emerging countries. For the 14-15 year old age group, Michelin has also been running for six years,the Achtung Auto program in partnership with ADAC(German Automobile Club), a million adolescents have already participated. For young adults learning to drive, we distribute educational materials on the safety aspects of tires in driving schools.

Heavy involvement in large-scale initiativesLarge-scale programs are organized in the framework of new public/private and national/international partnerships such as GRSP (Global Road Safety Partnership), an association composed of international organizations, multinational companies and NGOs. GRSP focuses its initiatives on countries with a poor road safety record (e.g. Thailand, Vietnam, China, Kuwait, South Africa, Poland, Romania, Hungary, Brazil) and provides governments with technical assistance and advice in legal and prevention matters to encourage them to tackle the issue of road safety.

Finally, in 2008, in partnership with the WHO (World Health Organization), Michelin also worked towards creating an international youth association for road safety, aimed at 16- to 25-year-olds: this association will be inaugurated in 2009.

Acting for road safety, beyond tires

With the help of Kate McMahon, an independent road safety consultant, I recently completed a review of the activities supported by the Global Road Safety Initiative (GRSI) − a program funded by Michelin and six other companies. GRSI addresses some of the most critical risk factors for road users in emerging countries. Let us lookat some examples.

In South East Asia, because of the explosion in the number of motorcycles and the resulting head injuries, GRSI promotes the use of helmets. In China, GRSI focuses upon the protection of pedestrians, cyclists and improving child safety. In Brazil, GRSI has helped to establish a number of very successful city partnerships of professionals and citizens to reduce fatalities due to road crashes. The Initiative is beginning to make a real difference in these countries and we hope, with Michelin’s continued participation, it can build on these successes and will have suffi cient resources to expand into other countries.”

Richard Scurfi eld, Independent Transport Advisor

“

In Brazil, the project Na pista do melhor Caminho (the safest way ) was launched in August 2008 in partnership with the

the state body responsible for Traffi c. The project consists of a fun educational tool to send out the message “the winner is the one who chooses the best path”. The game inspires participants to think about their own attitude and the role that each road-user plays. It provides an opportunity to increase familiarity with rules relating to traffi c, citizenship, and ethics. It is a team game, based on movement, chance and knowledge of traffi c laws, staging scenarios involving a pedestrian,

The themes tackled range from drinking and driving and the responsibilities of pedestrians and cyclists, to vehicle maintenance, fi rst aid and safe driving. The pieces used in the game are made out of recycled materials. The campaign targets adolescents. The fi rst teachers to be trained in leading this game will be from high schools close to our headquarters

plant; we will then extend the project to other areas with a high accident rate. A digital version of the game

On the way to the best path, a game to learn road safety


Michelin has always worked toward making mobility safer, easier and more enjoyable. Year after year, Michelin has developed a range of travel assistance products and services with this aim in mind.

Maps and Guides: “a better way to travel”A century old, but still evolving with the times, MICHELIN Maps and Atlases, Tourist Guides and Accommodation/Restaurant Guides help make customers’ travels enjoyable and effi cient. Accurate information about an itinerary (location of tire infl ation facilities, rest areas, garages, particularly dangerous road sections, etc.) ensures travelers are better prepared and can travel more safely.

Today the collection boasts 650 publications, and 15.5 million Maps and Guides are sold each year in 90 countries. In 2008, Michelin launched a series of new products, making MICHELIN’s offer the most comprehensive on the travel publications market: satellite-image relief maps of France’s départements, new destinations in the Voyager Pratique collection (including Beijing, published in February 2008), a new guide to visiting France in a camper van, Escapades en Camping-Car, new Green Guides with eighteen additional titles... Regarding gastronomy, 2008 saw the launch of the first MICHELIN guide in China (the Hong Kong Macau guide) and the introduction in France of Étoile, the MICHELIN guide magazine covering the latest

news on gastronomy, travel and wines, and inviting readers to try out new restaurants.

Travel preparation with ViaMichelin to save time, increase comfort and improve safetyAvailable in eight languages, the ViaMichelin.com website facilitates travel preparation in over 45 countries in Europe, North America and parts of Asia and Africa. This travel assistance portal offers practical services including dynamic information (maps, satellite photos, traffi c information), services and content related to travel and tourism and personalized itineraries (with the choice of scenic, cheapest, shortest, best route for cyclists, etc.) in order to help users travel more effi ciently and safely. With 82,000 travel data sourced from the Michelin guides, the weather, and an online hotel reservation service (over 70,000 establishments in the world), ViaMichelin helps travelers perfectly organize their journey. All the information on hotels, restaurants and tourist sites from the MICHELIN guides are also available worldwide via the latest mobile devices from the main brands. While traveling, traffi c information, which in the past few years has become an essential function of every navigation system, enables users to optimize their travel whenever they need to do so. As France’s top-ranking provider in this fi eld, ViaMichelin equips major automobile and GPS manufacturers (over 1 million users since 2005). ViaMichelin also offers positioning services aimed at companies and, more

particularly, those with distribution networks. This information is marketed in several formats, such as Internet, integrated navigation systems, mobile GPS, etc.

Michelin Lifestyle, the value of the brandThe objective of Michelin Lifestyle Limited (MLL) is to strengthen customer relations by marketing a range of brand-extension products exemplifying Michelin’s values of quality, safety and performance. One of our main focuses when designing our products is safety. At the end of 2007, in tandem with its licensee, MLL launched a safety lighting kit for cars, which was named “Product of the Year 2008” in France. To improve winter safety, MLL proposes EasyGrip snow chains, which French magazine Auto Plus ranked first out of eight competitors, awarding it fi ve stars. In June 2008, at the Marketing Society’s “Marketing Excellence Awards” in London, Michelin Lifestyle received the Award for Excellence in Brand Extension for its MICHELIN motoring accessories in the United Kingdom. In the United States, in June 2008, LIMA (Licensing Industry Merchandisers’ Association) nominated the MICHELIN brand in the “Best Brand Program of the Year” category, based on the success of its motoring accessories, and in particular its windshield wipers.

Working to make road mobility easier, safer and more enjoyable

The new Michelin Maps and Guides, the pleasure of travel Michelin Lifestyle varied range of accessories

In order to facilitate drivers’ travel, in 2003 Michelin created Michelin OnWay, a three-service offer without charge to all purchasers of at least two MICHELIN tires. The offer includes insurance against puncture, theft and vandalism; breakdown assistance in less than an hour; and assistance with directions while traveling.

users. Customers who had used Michelin OnWay

Michelin OnWay, three free services


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Measuring customer satisfaction is essential to making progress. We carry out numerous surveys and studies worldwide to quantify as precisely as possible our capacity to meet expectations.

In the passenger car segment, 25% of our sales are in the original equipment market, where our direct customers are vehicle manufacturers. Therefore, consumers do not generally choose the tires that equip their new vehicles, but the level of satisfaction offered by this original equipment infl uences their choice of replacement tires. The replacement market represents 75% of our sales. Our direct customers in this segment are tire distributors, who, by virtue of their direct relationship with consumers, play a signifi cant advisory role with our end customers. To improve our position on these markets, we regularly measure satisfaction levels among our customers – both consumers and manufacturers – through a number of studies.

Perceived quality: Michelin ranked highestBrand Equity studies measure brand awareness and the perceived quality of a brand among consumers. This indicator sums up attachment to a brand resulting from factors including use of our products and services and, more generally, perception of the Company by consumers. These studies are carried out every year by independent specialized institutes among a sample

of potential purchasers in Europe, the United States, Brazil and certain Asian countries. The indicator is based on two values: fi rst, salience (the percentage of the survey population who know a brand sufficiently well to give a qualitative opinion) and secondly, the perceived quality score. For example, if salience is 80% and the average perceived quality score is 8 out of 10, then Equity is 0.80 x 8 = 6.4.

In 2008, the MICHELIN brand was ranked ahead of its competitors worldwide. This result is all the more remarkable given that the MICHELIN brand achieves the same levels of equity as the biggest international brands all sectors combined, and in categories that are usually deemed more attractive to the consumer. Michelin thus reaches the same level as very popularbrands on their markets. This result confi rms the special status enjoyed by the MICHELIN brand in the eyes of consumers and our customers.

Customer satisfaction in the original equipment market: J.D. Powerin the United States…J.D. Power’s customer satisfaction survey ranked Michelin tires top in original equipment for the tenth time in 2007. Michelin was commended in each of the survey’s four segments: Luxury/Sport, Mass Market/Non-Luxury Sport, SUV and Pick-up/Full-size Van. These results bring the total number of J.D. Power

Awards won by Michelin in the United States to 56, whichis more than four times the number of awards won by all ofour competitors combined!

in Japan…Michelin has been ranked fi rst since 2002 in the passenger car category.

We measure our customer satisfaction

JD POWER USA:56 awards for Michelin, 4 times more than all competitors combined

MICHELIN XDR tires on a Komatsu rigid dump

truck in the coal mine of An Taibao in China

Our Earthmover tire range is also successful among its customers, both in the original equipment and in the replacement markets.

In March 2008, during the Conexpo-Con/Agg fair in Las Vegas (United States), Caterpillar awarded Michelin

recognition of the performance of our quality system and the strength of our continuous progress approach in all our activities.

In 2008, Komatsu also recognized Michelin’s performance by naming it “best supplier” in Europe and North America.

Corp., the leading coal supplier in China, rewarded Michelin for its performance in terms of quality, service, price, supply and payment terms. Here, our offering implied the optimization of tire usage toward improved durability.

The Michelin Earthmover range rewarded by our customers

EuropeRussia Brazil

ChinaJapan

United States

Michelin Closest competitor

MICHELIN Brand Equity in 2008

7.4

6.2

7.6

6.5 7.

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6.2

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5.3

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5ST

AGE

This is the last stage in the tire’s life, the fi nal recovery, material or energy. Over one billion tires are sold each year across the world, ultimately generating as many end-of-life tires. Although tire lifespan is increasing, so is the volume of end-of-life tires, due to growing number of vehicles in the world. Today, end-of-life

tires are a resource that is 100% recoverable with ever more applications. For over ten years, Michelin has been committed to setting up structured, effi cient management systems for end-of-life tires in all the countries where it hasa signifi cant presence.

End-of-liferecovery,a promising future for end-of-life tires

91% of end-of-life tires recovered in Europe, 88% in the United States and 87% in Japan Launch of a mechanism for sharing best practices among European end-of-life tire management companies Inclusion of end-of-life tires on the priority list of materials to be removed from the category of waste in the European directive of October 2, 2008 (2005/0281)

An agreement was signed in France in February 2008 on the recovery of abandoned historic stockpiles Ramp-up of the Spanish management company Signus achieved in record time Setting up of an international project group within the World Business Council for Sustainable Development (WBCSD) with the aim of sharing best practices and promoting the implementation of end-of-life tire recovery networks worldwide

Used tire granules from material recovery

Respect

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ShareholdersResp

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Facts



END-OF-LIFE RECOVERY

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The recovery networks’ conditions for success Developing an eff ic ient recovery program impliesthe possibility to:

are effectively collected;

2007, almost 3.4 million metric tons of used tires in the 27 EU member States, and more than 11 million tons worldwide;

are either retreaded or reused as a second-hand tire;

raw materials or alternative fuel with genuine intrinsic and market value;

applications, which to date remain a cost center. Two key contributory factors are operational efficiency and enhanced product recovery brought about by R&D work and the opening of new markets;

or stockpiled in unauthorized landfi lls – 4 billion end-of-life tires are estimated to be stockpiled in this way worldwide.

Out of the various end-of-life tire management systems, Michelin advocates the implementation of the producer responsibility system see feature , as it is the best model for meeting efficiently and sustainably the related health, environmental and economic challenges. We also defend the principle of a transparent environmental contribution for consumers, identifi ed by a separate line on the invoice.

Recovering end-of-life tires, an ambitious program

Producer responsibility system:

The law sets the recovery objectives to be met and assigns responsibility to tire producers (manufacturers and importers).

company responsible for collection and recovery using service providers selected by tender bid. The company is funded by a contribution invoiced to customers for each new tire purchased. The company controls operations and reports to the State. This system, set up in Scandinavia as early

Michelin and the tire industry in general.

Free market system:

The law sets the recovery objectives to be met, but does not designate those responsible. Consequently, recovery networks organize and operate according to market conditions. Collection and recovery costs are therefore a determining factor in an operator’s decision to process one stockpile of end-of-life tires rather than another. The risk is that tires located in remote areas do not get processed.

Tax system:

The State collects from tire manufacturers or importers a tax proportional to the volumes marketed. It is also responsible for organizing collection and processing and pays the operators in the recovery chain. The risk of this system is that during a diffi cult budgetary period, the tax or fee levied may be used for other purposes.

Three end-of-life tire management systems, varying results

End-of-life Tire Management Systems and Companies in Europe (source ETRMA, updated December 2008)

Producer responsibility system Free market system Tax system Unregulated marketETRMA, www.etrma.org

tire recovery rates remain low. In addition to local stockpiles, end-of-life tires are sometimes imported from other countries, which exacerbates the situation.

This success is largely due to the effi ciency of the producer responsibility system, the dominant model in Europe, currently in place in 17 countries. Italy is currently looking to implement the system in 2009.

Nearly 90% in the United States...In the United States, 88% of end-of-life tires were recovered in 2007. Certains states, such as South Carolina, currently recover 100% of their tires. Furthermore, the processing of historic stockpiles is progressing at a quick pace, refl ecting the commitment made within the RMA (Rubber Manufacturers Association) to reduce these stockpiles by 55% in 2008 as compared to 2001 levels.

... and in JapanIn Japan, the current tire-management system is “Free Market”. In 2007, 87% of tires were reused, retreaded or recovered. At Michelin’s instigation, JATMA (Japan Automobile Tire Manufacturers Association) is examining the option of adopting a system based on the European model in order to improve the traceability of the remainder.

Recovery rate remains low in emerging countriesIn most emerging countries, due to the weakness of recovery regulation and the lack of infrastructure for collecting tires, used

Recovery rates increase signifi cantlyEnd-of-life tires, a quality raw materialEven used, the tire materials maintain numerous qualities, such as elasticity, a robust structure, high calorifi c value, high carbon content, durability… All of these qualities make end-of-life tires a highly recoverable raw material, with uses in numerous applications. Current European regulation classes end-of-life tire derived products as non-hazardous waste. Consequently, the administrative aspects involved in transporting and transforming end-of-life tires are complicated and onerous. This is why Michelin, alongside its ETRMA partners (European Tire and Rubber Manufacturers Association), promotes the classifi cation of end-of-life tires as a secondary raw material in Europe. A key step was made in 2008 when a directive of the European Parliament and of the European Council (dated October 2, 2008) included end-of-life tires on the priority list of materials to be tested against criteria enabling their removal from the “waste” category.

Over 90% of tires recovered in Europe The end-of-life tire recovery rate is constantly on the rise. In 2007, this rate reached 95% in the EU 15 and 91% in the EU 27, Norway and Switzerland. Eleven countries out of 27 reached a 100% recovery rate. The progression was particularly swift in certain East European countries, such as Hungary, which achieved a 100% recovery rate in 2007.

On the initiative of Aliapur, since 2006, “Southern Europe Coordina-tion” meetings have been heldfour times a year, attended by SIGNUS, our Spanish counterpart,VALORPNEU, from Portugal and, since March 2007, the Italiancompany ECOPNEUS. At these meetings, we share our R&D results, discuss our operational best prac-tices and the progress of recovery networks. We have harmonized our product defi nitions and names, as well as our performance indicators. These meetings are particularlyuseful for ensuring continued progress in our respective organi-zations. We hope that, with the support of ETRMA, other countries will progressively be included.”

Eric Fabiew, General Manager of Aliapur, main French end-of-life tire management organization

“* Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg,the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom.** Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia.*** Canada, United States, Mexico (new calculation method).

End-of-life tire recovery rate (as a percentage of total volume in tonnage)

Sources: ETRMA, RMA, RAC (Rubber Association of Canada), Estimated fi gures for Mexico, JATMA. 2008 data to be available late 2009.

Disposed of andnon-documented Energy recovery Material recovery Export - reuse Retreading within the zone

Europe United States Japan

Tires 84 86 85

Glass 65 22 90

Car batteries 90 (UK) 99 -

Steel containers 63 63 88

Aluminum beverage cans 52 52 92

PET bottles 39 24 66

Paper/cardboard 64 50 66

Recovery rate of end-of-life tires compared to other products(Estimated recovery rate in %.Available data from 2003-2006)

Source: TIP WBCSD.

WesternEurope*

NorthAmerica***

EasternEurope**

1210

3433

11

1310

4131

5

186

2535

16

176

2436

17

21 3

1252

12

316

1256

13

931

48

2542

29

12

4

*07*05 *07*05*07*05*07*05

In France, since 2004, the “ ” (used tires) decree has stipulated that manufacturers of new tiresare responsible for the end of life of the tires thatthey put each year in the national market. But this decree does not provide for previously accumulated and abandoned “historic stockpiles”, estimated at more than 200,000 metric tons. In an attempt to unlock this situation,

tons of stockpiled end-of-life tires at its own cost. At the end of 2008, 24,000 tons had already been processed. Furthermore, a major agreement was signed in February 2008 between the manufacturers, distributors and the French government: the manufacturers agreed to process abandoned historic stockpiles within eight to ten years.

All historic stockpiles in France will be processed within 10 years


END-OF-LIFE RECOVERY

73

In South Africa, it is estimated that historic stockpiles in the Western Cape region amount to 800 million tires. In Mexico, stockpiles are estimated at one to two billion end-of-life tires.

It was in view of this situation that the 11 manufacturers of the Tire Industry Project (under the auspices of the World Business Council for Sustainable Development) set up the “End of Life Tires” task force. It aims in particular to contribute to dealing with the question of historic stockpiles in emerging countries by promoting the dissemination of best practices. In Brazil, for example, considerable efforts have been made and the latest fi gures show an end-of-life tire recovery rate of 82%.

More innovative recovery applicationsIn light of price increases in raw materials and as their scarcity is set to last beyond the current crisis, new end-of-life tire recovery applications are being developed, including:

the high carbon content of tires;

composite materials;

A rigorous assessment of environmental and health risks To ensure that recovery applications are environmentally sound and do not bear any health risks, as a forerunner, Aliapuris performing tests in real-life situations and ecotoxicity studies in conjunction with ADEME, the French governmental agency for the environment and energy control. Tests performedon artifi cial turf and the use of whole tires in water retention basins have demonstrated the absence of environmentalor health risks. Two other studies on shreds in waste-disposal center drainage and the use of whole tires in quarry redevelopment are underway.

Michelin supports the European standard for end-of-life tire derived productsMichelin supports ETRMA-led initiatives aiming to introduce a European standard for end-of-life tire derived products. A French commission on end-of-life tires, presided over by Aliapur, was established within the AFNOR, the French national organization for standardization. Its aim is to contribute to defining a European standard, putting forward to the European Union the French point of view. The commission drew up a list of needs and priorities for recovery processes, based on views collected from the professionals concerned. Two main objectives:

real products alongside their competitors;

environmentally sound way.

The European Committee for Standardization recently set up a technical committee (TC 366) with the objective of defi ning specifi c requirements and testing methods for materials derived from recovered tires, and specifying conditions for reuse of tire-derived products in other applications.

Reach a 100% recovery rate in Europe by 2012

Continue efforts aimed at havingend-of-life tire derived products removedfrom waste category

Contribute within the WBCSD to disseminating global best practices, setting up recovery applications for end-of-life tires in new countries and processing historic stockpiles

Progress objectives

76% and higher 51% - 75% 26% - 50% 1% - 25% 0% or reporting does not exist

Hawaï

Alaska

End-of-life tire recovery rate in the United States*

* Excluding retreading

Source: 2007 RMA market survey.

In Spain, a producer responsibility system has been in

(www.signus.es), has proved its effi ciency in record time, with a recovery rate of 100% of end-of-life tires in 2007,

by the fi ve biggest tire manufacturers in Spain.

The following results were achieved in 2007: collections made

the exemplary case of Spain


The tire has gone through its entire life cycle, from design to final end-of-life recovery. The technical performance of our products is the foundation of the Company’s economic results, which gauge the Group’s capacity to find the right balance between the different values of the Michelin Performance and Responsibility approach. The time has come for us to question how we are perceived, to communicate with our Shareholders, to consolidate our results and have them verified by a third party.

2007 ended with healthy commercial and financial performances. 2008 was marked by a significant increase in the cost of raw materials and a financial crisis that quickly and suddenly turned into an unprecedented global economic crisis. Only sales in speciality segments continued to grow, before losing momentum in the last two months of the year. The severe downturn at the end of 2008 resulted in a decline on the world markets for the whole year.

Passenger car and light truck tires -2.2% in the replacement market, -4% in the original equipment market; Truck tires -0.2% in the replacement market, -3.9% in the original equipment market. This had a significant impact on our sales, down 2.7% in value to 16,408 billion, and by 2.9% in volume.

Assessing our results,

communicating with our shareholders

75

Steep decline at the end of 2008The increase in raw material and energy costs during the fi rst half, the effects of which were felt for the whole year, was only partially offset by price increases. Michelin experienced a record increase in external costs: 968 million, including 804 million for raw materials alone.

The two factors combined – the infl ation of external costs and a severe drop in demand in the second half – led to a 4.2 point loss in operational profi tability, which settled at 5.6%. Our net result stood at 772 million for 2007 and at 357 million for 2008. The free cash flow for 2008 was negative at - 359 million, compared to a positive fi gure of 433 million for 2007. Finally, debt ratio climbed 14 points to 84%.

For the 2007 fi nancial year, a dividend of 1.60 per share was distributed, an increase of 10% compared to 2006. For 2008, a dividend of 1 per share was successfully voted on at the Annual General Meeting of Shareholders on May 15, 2009. Although this represents a decrease of 37% compared to 2007, it is nevertheless a sign of confi dence in the future.

External recognition of our performanceFinancial rating agencies which assess listed companies evaluate, in particular, the short- and long-term risk of a company defaulting on its obligations to creditors. Their risk analysis of Michelin is closely linked to the automobile industry.

In addition to fi nancial ratings, the social and environmental performance of major companies is becoming more important. Socially Responsible Investment (SRI) consists of taking into consideration social and environmental criteria as well as fi nancial objectives in all investment decisions, and represents an ever-increasing share of global investment.

Non-financial rating agencies build indices, i.e. selections of companies that meet their particular criteria, which are evaluated either on the basis of information published by the companies and other available public information or on the basis of questionnaires sent to the companies.

Based on its performances, at the end of both 2008 and 2007, Michelin was listed in four SRI indices recognized in Europe and throughout the world: ASPI Eurozone, DJSI World, DJSI STOXX and ESI Europe.

In the DJSI WORLD index, Michelin was named Sector Mover, i.e. the company having made the most progress from one year to the next, and was awarded the Gold Class distinction.

Michelin in the “Global 100” listBased on its results in 2008, Michelin was selected for the fi rst time among the Global 100 Most Sustainable Corporations, a list composed by the American rating agency Innovest and Corporate Knights Magazine. This list names 100 companies, from all economic sectors and from 15 countries, for their management of risks and opportunities in the environmental, social and corporate governance fields, compared to other companies in their industry.

Finally, SAM (Sustainable Asset Management AG), which sets the DJSI (Dow Jones Sustainability Index), underlines the strong link between a company’s score in the index and the return on its shares. Having studied 400 global companies over a seven-year period, it observed that the companies with the highest sustainable development scores (top 20%) are 10% more profi table than the average of the companies studied, whereas the bottom 20% are 10% less profi table.

Financial results and external evaluations

20042005

20072008

2006

15,0

48

15,5

90

16,3

84

16,8

67

16,4

08

2008 net sales (in millions of euros)

2004

1,30

38.

7%

20052007

20082006

Operating Result(1)

(in millions of euros)

Operating Margin(1) (in %)

1,36

88.

8%

1,33

88.

2%

1,64

59.

8%

920

5.6%

(1) Before non-recurring items.

CGEM

Short-termStandard & Poor’s A-3

Moody’s P-2

Long-termStandard & Poor’s BBB

Moody’s Baa2

OutlookStandard & Poor’s Negative

Moody’s Stable

RatingsAs of 12/31/2008

de l’Ordre des Experts-Comptables (French National Superior Council of the

for the

Loyal and attentive shareholdersMichelin’s institutional and individual shareholders are the owners of the Company. They have made a long-term commitment and contribute to Michelin’s development, by agreeing to share its risks while exercising their decision-making powers.

As of December 31, 2008, the Michelin group had 2,570 institutional and 182,866 individual shareholders. They are all registered by name, which enables us to foster closer, more personalized relationships. More particularly, we have a specific communications program aimed at our individual shareholders. The breakdown of our capital shows a strong proportion of individual shareholders, who represent 14.8% (including employee shareholders).

Shareholders committed over the long-termThe loyalty and commitment of Michelin shareholders is one of the Group’s strengths. At the end of 2008, 81% of our shares owned by individual shareholders (excluding employee shareholders) had been held for more than four years.

In an industrial context in which the Group’s decisions have lasting implications, Michelin believes that Shareholders who show commitment and a willingness to take risks over the long-term should have a greater influence on the Company’s strategic decisions. This is why, according to their statutes, shares held for four years or more by the same shareholder are allocated double voting rights.

Success of our third employee shareholder plan Michelin’s policy of employee shareholding is ongoing. In 2008, 56% of our employees in 55 countries over five continents had subscribed to the third Employee Shareholding Plan. This high subscription rate, in spite of the uncertain financial climate, is a testament to our employees’ understanding of the economic mechanisms and to their confidence in the Group’s robustness and its mid- and long-term strategy.

After completion of our three employee shareholding plans, nearly 76,000 Group employees or former employees are shareholders, which makes it a benchmark to CAC 40 listed industrial companies. As of December 31, 2008, the number of shares held by Michelin employee or former employee shareholders was 3,278,453, which represents 2.3% of the share capital.

Even greater vigilance in times of crisisOur shareholders place their confidence in the Company and articulate what they expect in return: optimal level of revenue, appreciation of the Company’s assets, effective exercise of their decision-making power, rigorous corporate governance principles, good performance in terms of sustainable development and quality communication.

Our responsibility is to live up to shareholders’ confidence and expectations. In these times of plunging markets, we are particularly attentive to this responsibility, based on rigorous

monitoring of the Company’s activity. We attach the greatest importance to controlling industrial and financial risks in the long term, in particular those risks that might jeopardize the Company’s integrity. We are deploying a concrete Sustainable Development approach: at the heart of the Company strategy, aiming at constant progress in environmental performance of our products and our implementation of Respect for People.

Finally, to communicate with its shareholders, the Company is working toward further developing its communication tools which we wish to be regular, offering open, precise and transparent information with respect to Michelin’s performance.

Employee Shareholder Plan 2.3% Individual Shareholders 12.5% French Institutional Investors 22.7% Foreign Institutional Investors 62.5%

Breakdown of capital(in percentage, as of 12/31/2008)

Employee Shareholder Plan 2.8% Individual Shareholders 17.5% French Institutional Investors 23.0% Foreign Institutional Investors 56.7%

Breakdown of voting rights(in percentage, as of 12/31/2008)

The success of the third employee shareholder plan is a testament to the confidence of Michelin’s personnel in their Company.


77

Year after year, we strive to enhance the dialog that we are having with our shareholders in numerous and varied forms. We wish to offer them access to full information tailored to their specifi c needs.

Meeting our shareholdersThe Annual General Meeting, held every May in Clermont-Ferrand (France), is the perfect time to meet and confer with our shareholders. But this is not the only opportunity: six shareholder meetings were held in 2007 and seven in 2008, in the French cities of Toulouse, Amiens, Rennes, Strasbourg, Paris, Dijon and Grenoble.

Numerous meetings with investors and fi nancial analysts were also held in 2008: 241 meetings in 21 countries provided opportunities to enjoy a dialogue with 735 investors. Theme-based presentations and site visits were also organized for analysts, investors and portfolio managers. During the 2007 Challenge Bibendum in Shanghai, some twenty investors joined us in China. They were thus able to gain a better understanding of our activity by attending demonstrations of advanced technology within the framework of Challenge Bibendum, but also by visiting a Michelin plant, meeting our local management and having a look around one of the retail outlets belonging to our TyrePlus franchise network.

Finally, specifi c SRI (Socially Responsible Investment) meetings took place: we met with 28 investors interested particularly in our approach to Sustainable Development, in France, Great Britain and the United States.

Communicating precise informationAn extremely wide variety of public documents, including regulated information, cover the company’s activity, strategy and fi nancial information:

Annual Report, including the Annual Financial Report, Reference Document and pages published pursuant to the new economic regulations law (NRE) on the social and environmental impact of the company’s activity;

Interim Financial Report;

hareholder’s Guide, an explanatory document, fi rst published in May 2006, aimed at providing individual shareholders with practical and instructive information;

Letter to Shareholders, a bi-annual document, reworked in terms of its form and content in 2008: 150,000 copies are printed in 12 languages;

the Factbook collates much quantitative and qualitative data relating to the Group and its organization, as well as the markets and their evolution;

Michelin Performance and Responsibility Report.

This information and these documents are easily accessible in both French and English on the Michelin group’s website: www.michelin.com/corporate and on request from the Michelin Investor Relations service.

Consulting our shareholders on the quality of our communicationsWe are keen to take into account the point of view of our shareholders regarding the quality of our communications.

To this end, we work with the Shareholders’ Consultative Committee. Founded in 2003, the Committee is composed of twelve members, including two Group Employee Shareholders; a third of the seats come up for renewal every year. Its role is to help improve communication between Michelin and its shareholders by providing its opinion and advice. It recently gave feedback on several Michelin publications: the Shareholder’s Guide, the Letter to Shareholders and the Michelin Performance and Responsibility Report.

Finally, we conduct every other year a survey relating to perceptions of our fi nancial communications with investors from Europe and North America. The survey dated June 2007 demonstrated that understanding of our Horizon 2010 strategy was good and that our fi rst and foremost objective to present the facts was well received.

Regular, transparent communication with our shareholders

The Shareholders’ Consultative Committe at the General Shareholders’ Meeting in Clermont-Ferrand on May 16, 2008The 2008 Shareholder’s Guide

on November 12, 2007, the winner of the “Investor

Financiers, French Society of Financial Analysts), among others, distinguishes companies based on six criteria that illustratethe quality of investor relations. The three main criteria are: the quality of information provided in terms of precision and transparency, the regularity of contact with and the availability of the company’s representative. The jury,

analysts and managers, awarded the 2007 prize to Michelin.

Michelin rewarded for its work with investors

MICHELIN in figures

All financial data correspond to IFRS (International Financial Reporting Standards).

Additional data are published in the 2008 Annual Report of the Michelin group, pages 161 to 178.

(1) 2008 Dividend approved at the Annual General Meeting of Shareholders on May 15, 2009.

(2) Unmeasured emissions of sulphur dioxide and nitrogen dioxide were estimated by the Environment Service on the basis of emission factors supplied by the Environment and Prevention Reporting Referential. These estimated emissions represent less than 1% of the Group’s emissions.

(3) These rates are the result of work performed by the end-of-life tire management companies in each Zone.

(4) The methodology for the elaboration of this statistics has evolved; the 2005 percentage has been recalculated by the new method.

NA: not available


2005 2006 2007 2008 GRI Indicators

Net sales (million euros) 15,590 16,384 16,867 16,408 EC1

Operating income before non-recurring items (million euros) 1,368 1,338 1,645 920 EC1

Operating margin (as % of net sales) 8.8% 8.2% 9.8% 5.6% EC1

Net income (million euros) 889 573 772 357 EC1

Net debt (million euros) 4,083 4,178 3,714 4,273 EC1

Net income per share (euros) 6.13 3.95 5.32 2.46 EC1

Net dividend per share (euros) 1.35 1.45 1.60 1.00 (1) EC1

Debt-to-equity ratio 90% 89% 70% 84% EC1

Total purchasing of goods and services (million euros) 8,977 9,810 10,013 10,306 EC1

Payroll costs (million euros) 4,780 4,718 4,732 4,606 EC1

Headcount December 31** 127,319 126,673 121,356 117,565 LA1

Training Access Rate (TAF) 2.8% 2.9% 3.7% 4.2% LA10

Hours of training per employee per year 50 52 63 69 LA10

Lost time injury frequency rate (number of workplace accidents resulting in absence from work per million hours worked)** 3.61 2.55 2.39 1.85 LA7

Severity rate (number of days of absence from work per thousand hours worked)** 0.25 0.21 0.21 0.21 LA7

Percentage of senior management posts held by women 3.4% 4.8% 4.9% 5.2% LA13

Percentage of management posts held by women 14.3% 14.78% 15.1% 15.9% LA13

Percentage of senior management posts held by employees of non-French origin 34% 43.61% 43.50% 44.20% LA13

Percentage of tires produced in ISO 14001 certified factories (in tonnage)** 94.8% 99.4% 99.5% 99.5% -

Water consumption (in m3/t of finished product)** 15.0 14.9 13.3 12.8 EN8

Energy consumption (in GJ/t of finished product)** 17.4 17.2 15.6 15.3 EN3 – EN4

of which Michelin fixed sources 10.6 10.5 9 8.5 EN3

of which steam (subcontracted) 1.0 1.1 1.2 1.3 EN4

of which electricity 5.7 5.6 5.4 5.5 EN4

CO2 emissions (in t/t of finished product)** 1.53 1.48 1.37 1.35 EN16

of which Michelin fixed sources 0.75 0.73 0.64 0.60 EN16

of which steam (subcontracted) 0.11 0.12 0.13 0.15 EN16

of which electricity 0.66 0.63 0.59 0.60 EN16

Emissions of sulphur oxides (SO2-equivalent ) (2) (in kg/t of finished product) 1.65 1.22 1.27 1.08 EN20

Emissions of nitrogen oxides (NO2-equivalent) (2) (in kg/t of finished product) 1.01 0.85 0.89 0.82 EN20

Volatile Organic Compound (VOC) emissions (in kg/t of finished product)** 4.27 3.97 3.48 3.13 EN20

Production of waste (in kg/t of finished product)** 140 130 128 127.5 EN22

Quantity of waste sent to landfill (in kg/t of finished product)** 33 26 20 16.2 EN22

End-of-life tire recovery rate (as % of total volume) (3) Western Europe 89% 89% 95% NA EN27

End-of-life tire recovery rate (as % of total volume) (3) North America 84%(4) NA 83% NA EN27


79

Review Report from one of the Statutory Auditors, PricewaterhouseCoopers audit, on the processes used to compile certain social and environmental information, as well as on certain social and environmental indicators

Nature and scope of our workWe performed the procedures described below in order to ascertain with moderate assurance that no material irregularities exist with regard to the processes used to compile certain social and environmental information, as well as to certain social and environmental indicators disclosed. A higher level of assurance would have required further investigation.

With respect to social and environmental information compilation processes, we performed the following procedures:

aforementioned social and environmental information in light of the relevance, reliability, objectivity and understandability of such information;

responsible for creating and applying the procedures and for consolidating the data in order to verify that the procedures had been properly understood and implemented. We also met with the following Directors and Departments: the “Finance Group Department”, the “Personnel / Training Group Department”, the “Personnel / Global Compensation and Benefits Group Department”, the “Prevention and Industrial Performance / Environment and Hygiene Management Department”, the “Prevention and Industrial Performance / Safety of People and Property Management Department”;

in 11 countries, in order to determine whether social and environmental reporting procedures were being properly applied;

order to verify that the data had been correctly centralized and consolidated.

With respect to social and environmental indicators marked by “ ** ” in this report, in addition to the work concerning reporting procedures defined above, we selected a sample of industrial sites (Aranda, Campo Grande, Cataroux, Cuneo, Opelika, Pictou, Shenyang, Tuscaloosa, Valladolid and Waterville) according to their contribution to the data consolidated by the Group. For the sites and entities selected, we went onsite to verify understanding and proper application of procedures,

This is a free translation into English of the Statutory Auditor’s Review Report issued in the French language and is provided solely for the convenience of English-speaking readers. The Review Report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

To Michelin group Management,

Further to your request and in our capacity as Statutory Auditor of the Michelin group, we have carried out a review for the purpose of enabling us to express moderate assurance on the processes used to compile certain social and environmental information as disclosed by the Michelin group in this 2007-2008 Michelin Performance and Responsibility report for the 2008 financial year:

injury frequency rate”, “Severity rate” of work accidents, “Headcount” as of December 31, “Headcount expressed as full-time equivalent”, “Training Access Rate”, “Percentage of men and women by status” (except senior management),

consumption”, “energy consumption”, “VOC emissions”, “emissions of sulphur oxides”, “emissions of nitrogen oxides”, “CO2 emissions”, “production of waste”, “quantity of waste sent to landfill”, “percentage of tires produced in ISO 14001 certified factories”, “MEF”.

Furthermore, we have carried out a review for the purpose of enabling us to express moderate assurance on certain social and environmental indicators as listed above (indicated by “**” on pages 7, 47, and 78 of this 2007-2008 Michelin Performance and Responsibility Report).

These processes, together with the indicators set forth in this 2007-2008 Performance and Responsibility Report, are the responsibility of “Prevention and Industrial Performance Department”, “Group Personnel Department” and “Performance and Responsibility Department” of Michelin, in accordance with the Group’s internal reporting standards. These standards are available on request from the Group’s head office.

Our responsibility is to express our conclusions on these information compilation processes and indicators based on our work.

and conducted detailed tests, based on surveys, consisting of verifying calculations and checking data against supporting documents. The contribution the selected entities made to the consolidated data represent:

expressed as full-time equivalent, and 18% of hours worked;

consumption” indicator, 21% for the “Water consumption” indicator, 23% and 15% respectively for the “SOx emissions” and “NOx emissions” indicators, 20% for the “VOC emissions” indicator, 23% of tire production, 19% and 25% respectively for the “Production of waste” and “Quantity of waste sent to landfill” indicators.

We were assisted in our work by experts from our Sustainable Development department.

Conclusion Based on our work, no material irregularities came to light that caused us to believe that:

for the aforementioned indicators did not comply with the Michelin group’s internal reporting standards;

comply with the Michelin group’s internal reporting standards applicable in 2008.

Neuilly-sur-Seine, May 14, 2009

PricewaterhouseCoopers Audit

Christian Marcellin Sylvain Lambert Partner Partner Sustainable Statutory Auditors Development Department

GlossaryAAcoustic comfort - The ability of a tire to limit the noise emitted in the tire-road contact area page 23 .Anthropogenic CO2 emissions - CO2 emissions linked to human activity page 9 .

CCarbon dioxide (CO2) - One of the main greenhouse gases, which contribute to heat from the sun being trapped inside the atmosphere. See also Greenhouse gases pages 8-9, 24-26, 45-51, 55-58, 61, 63 .Challenge Bibendum - Annual meeting of the world’s players in the field of road mobility organized by Michelin and attended by representatives of public authorities and of the media. Practical demonstrations of vehicles and technological systems allow their performances to be gauged and compared, with a view to meeting the challenges road transportation faces in relation to energy, environmental impact, safety and traffic flow pages 9, 26-27 .

DDurability - Maximum distance traveled by a tire before the degree of wear compromises performance, particularly in terms of safety pages 25, 55-65 .

EEcopoint - Unit used to measure the impact of product life phases in a Life Cycle Analysis (LCA). The ecopoint takes into account a wide range of criteria: impact on health, ecosystems and biodiversity, and consumption of mineral and fossil resources. To do this, it evaluates the intensity of the phenomena which cause such impact: emissions of organic and inorganic substances, climate change, emissions of inonizing radiation, carcinogenic substances, acidification, etc. page 20 .Empowering organization - A way of organizing teamwork that aims to develop people’s motivation and ability to take on wider responsibilities, the improved efficiency thus achieved benefiting the whole team. The assignment of roles, operating rules and the optimum evaluation of necessary means are undertaken within the team, with the overall aim of “continuous progress” pages 39-40 .

Endurance - The long-term ability of a tire to resist the different types of stress it undergoes throughout its life cycle pages 18, 24-26, 58 .Energy efficiency - A tire’s capacity to transmit a greater or lesser proportion of the energy that is transferred to it by the vehicle’s powertrain. See also Rolling Resistance pages 23-25, 45-48, 55-65 . Environmental footprint - A company’s environmental footprint corresponds to the overall impact on ecosystems that arises from its activities (consumption of energy and materials, pollution, use of soil, etc.). It concerns all the phases of the life cycle of its products: production of raw materials, manufacturing of products, use and end of life pages 47-50 .ETRMA - European Tyre and Rubber Manufacturers’ Associations pages 26, 71-73 .ETRTO - European Tyre and Rim Technical Organisation page 26 .

FFunctional based economy - To sell the service rendered by a product rather than the product itself.

GGlobal Reporting Initiative (GRI) - An official partner of the United Nations Environment Program (UNEP), the GRI is an independent organization. Its role is to establish and publish guidelines aimed at improving the quality, stringency and usefulness of economic, environmental and social reporting. It relies on the participation of companies, NGOs, institutional investors, professional organizations, universities, etc. page 78 .Global Road Safety Partnership (GRSP) - An international association created on the initiative of the World Bank and composed of international institutions, governmental bodies, development aid organizations and large international businesses. Its aim is to promote road safety in developing countries through actions tailored to the local context page 67 .Green tire - Low rolling resistance tire, invented by Michelin in 1992, making a direct contribution to reducing fuel consumption and pollutant emissions page 9 .Greenhouse gases (GHG) - Naturally occurring atmospheric gases that help to maintain temperatures on Earth and thus life as we know it. An excessive accumulation in the atmosphere, caused by an increased production of them by human activity, is considered to be one of the causes of global warming. The greenhouse gases registered by the Kyoto Protocol are

carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), sulphur hexafluoride (SF6) and perfluorocarbons (PFC). Their impact, which depends on their global warming potential, is generally expressed in CO2-equivalent, carbon dioxide being, by convention the reference pages 8-9, 47, 63 . Grip - The ability of a tire to transmit acceleration, braking and cornering torque without skidding. Grip plays a key role in reducing braking distances and in road holding during cornering, especially on wet roads pages 23-27, 55-65 .Group Service - A functional Michelin group entity in a given area, such as Purchasing, Audit or Personnel, providing support for operational activities and defining the corresponding Group strategy pages 7, 14 .

IISO - International Organization for Standardization pages 26, 58 .ISO 14001 - International norm; the certificate of conformity is granted to companies after appraisal of levels of planning, documentation and effective implementation of their environmental policy pages 12, 19, 32, 46 .

JJATMA - Japanese Automotive Tire Manufacturer’s Associations pages 26, 72 .

LLost time injury frequency rate - Number or workplace accidents resulting in absence from work for more than one day during a given period, per million hours worked pages 13, 40 .

MMEF (Michelin sites Environmental Footprint) Environmental performance indicator for Michelin sites that includes six components: water and energy consumption, carbon dioxide emissions (CO2) and volatile organic compound (VOC) emissions, and the generation of waste and its disposal in landfills. Each component is weighted according to its importance and is referenced to tire production tonnage pages 13, 46-49 .

OOriginal equipment - Tire market corresponding to equipment for new vehicules supplied directly to vehicle manufacturers pages 10-11, 53, 58, 64, 69 .


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PParticipation rate - Percentage of employees involved in safety initiatives for a given month (submitting a safety- related Progress Idea, reporting a near-accident, declaring a risk situation, etc.) page 40 .Producer’s responsibility - System by which the law determines the legal framework and assigns responsibility for the disposal of used products, in this case end-of-life tires, to the producers (manufacturers and importers) pages 71-73 .Product Line - Michelin group operational entity dedicated to the technical development, manufacturing and worldwide commercial activities of a specific range of products, such as passenger car and light truck tires, or truck tires page 7 .

RRadial - The radial structure separates functions performed respectively by the tire crown and the sidewalls. The radial tire introduced radial positioning of the reinforced rubber ply forming the tire’s casing, thus differing from the conventional bias-belted structure. The radial tire was invented by Michelin in 1946, improving the tire’s robustness and lifespan, thereby making for greater safety. It also reduces rolling resistance pages 4, 6, 64, 66 .Regrooving - Operation in which the tread pattern on a used truck tire is recut in the remaining rubber. This action prolongs the life of the tire, without compromising on safety, and gives a marked improvement in rolling resistance pages 61-63 .Replacement - Tire market corresponding to the replacement of worn original tires with new tires pages 10, 11, 53, 58, 61, 69 .Retreading - Operation in which the used tread of a truck tire is replaced by a new tread. This retreading procedure can be performed on a regrooved tire and the retreaded tire may, in turn, be regrooved. A retreaded tire has the same performance capacity as a new tire pages 21, 23, 61, 63, 72-73 .Road handling - Ability of a tire to transmit the driver’s commands in order to achieve safe and comfortable road holding page 59 .

Rolling resistance - Rolling resistance is the energy consumed by the tire as a result of the deformation it undergoes while rolling. Reducing tire rolling resistance helps to improve vehicle fuel efficiency and reduce pollutant emissions pages 11, 21-26, 45, 55-65 .RMA- Rubber Manufacturers Associations pages 26, 73 .

SSecondary raw material - Material from end-of-life products that can be reused to replace totally or partially a raw material. For example, end-of-life tires can be used as a fuel or for producing rubber objects page 72 .Severity Rate - Number of days of absence from work greater than one day resulting from workplace accidents during a given period, per thousand hours worked page 40 .Sipe - A narrow cut (a few tenths of a millimeter wide) grooved in a tire’s tread blocks, that improves its grip on wet and snow-covered surfaces page 60 .Social and economic footprint - Following the same logic as the environmental footprint, a company’s social and economic footprint corresponds to the creation of economic value and job equivalence linked to a company’s activity. It concerns all players along the chain of value (suppliers, manufacturers, distributors, customers, employees) and society as a whole, which benefits from the use of products and bears the external costs related to the company’s activity page 6 .Stakeholders - All of the parties that play a direct role in the company’s social and economic life (employees, customers, suppliers, shareholders), that observe the company (NGOs, trade unions) or that influence it (public authorities, local authorities, civil bodies) pages 6, 13 .Sustainable mobility - A way of organizing means of transport, enabling them to develop in such a way as to benefit society without generating unacceptable impacts for people and the environment, particularly in the long term, while remaining compatible with the economic objectives of the players concerned pages 6, 8-9, 12-13 .

This report has been compiled under the responsibility of the Michelin Performance and Responsibility approach co-ordination team. Graphic design: W & CIE – layout: JapaIllustrations: © eco-mobilite, © Michelin, © Bertrand Guay / AFP, © Arnaud Childeric/Michelin, © Pierre Chambon/Michelin, © Joël Damase/Michelin, © Michelin Lifestyle Limited, ©Thierry.Duvivier/Trilogi’c, © ETRMA, © Stagecoach, Nicolas Buisson/Tomas © Michelin, Gullin © Michelin, Philippe Gajic © MichelinPrinted by IME (France), an ISO 14001-certified company which complies with REACH legislation, on recycled paper (60%) and FSC certified paper (40% - paper produced from sustainably managed forests) with vegetable-based inks

TTire performance - All the criteria that characterize the qualities of a tire. Overall performance corresponds to the balance achieved in relation to a defined use pages 11, 23-25, 55-65 .Tire Pressure Monitoring System (TPMS) - On-board tire pressure monitoring system that alerts the driver to any significant underinflation in the tires by means of a warning on the dashboard page 66 .Training Access Rate (TAF) - Hours of training referenced to hours worked page 39 .Tread - Rubber compound ply on the circumference of the tire, forming the contact patch with the road surface pages 25, 56, 60-61 .

UUNECE - United Nations Economic Commission for Europe pages 26, 57 .

VVolatile Organic Compound (VOC) - Carbon compounds that evaporate at ambient temperature. Sunlight causes them to react with other atmospheric gases and form ozone or other photochemical oxidants pages 47-48 .

WWBCSD (World Business Council for Sustainable Development) - Association of companies committed to identifying, implementing and promoting concrete approaches to sustainable development as a means of development which embraces economic, social and environmental factors pages 8-9, 19, 26, 57, 72-73 .

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Michelin Performance and Responsibility Report 2007-2008

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