Michelin image called into question after US race

20th June 2005, Comments 0 comments

PARIS, June 20 (AFP) - The image of French tire-maker Michelin has been called into question following the withdrawal of its products for safety reasons from a Formula One race, with some analysts arguing that its name has been tarnished while others say the decision will in fact enhance its reputation.

PARIS, June 20 (AFP) - The image of French tire-maker Michelin has been called into question following the withdrawal of its products for safety reasons from a Formula One race, with some analysts arguing that its name has been tarnished while others say the decision will in fact enhance its reputation.

Michelin advised seven Formula One teams equipped with its tires against taking part in the race, staged in Indianapolis, Indiana in the US mid-west on Sunday.

The decision followed Ralf Schumacher's high-speed accident during a practice run on Friday, leaving the German driver so shaken he withdrew from the race.

Michelin then acknowledged it could not guarantee the durability of the tires it had supplied for the race.  

The incident could prove to be bad publicity for the company, which has relied on Formula One racing to showcase the quality of its technology, a campaign aimed notably at drivers of luxury cars.  

"It's not very helpful to their image and it was a disastrous case of crisis management," said Pascal Ragot, a crisis management specialist.  

"Michelin got it wrong with its product and ended up taking the Formula One teams hostage."

But he added that Michelin sales should not suffer since Sunday's withdrawal was the first such incident.  

Michelin's competition deputy director, Frederic Henry-Biabaud, said on Monday the company had no option but to withdraw.  

"Michelin would have been to blame if it had raced. Do you imagine what would have happened if, having seen the failure on Friday, we had decided to race the tire and we had a problem?" he told Europe 1 radio station.  

"I prefer, as a company, we find ourselves in this position rather than if there had been an accident."  

He blamed the specifics of the Indianapolis track and criticized motor racing's governing body, the FIA, for failing to agree to a compromise.  

"We proposed realistic, feasible alternatives," he added.  

Michelin had wanted to fly in replacement tires from its headquarters at Clermont-Ferrand. But Formula One's governing body, the FIA, refused to allow new tires to be used or a chicane to be set up to slow the cars.  

Michelin shares skidded and then recovered their grip in early trading here on Monday. In initial deals, the price of Michelin shares fell by 2.5 percent to EUR 50.20 but then rallied to show a loss of 1.46 percent to EUR 50.75.  

The share was also affected by press reports that Michelin had made emergency payments in an attempt to fill a hole of GBP 286 million (EUR 427.3 million) in its British pension fund for employees.  

One market analyst, who declined to be named, said the share had slipped on concern that the events in Indianapolis might damage the image of the company, but added that he considered the reaction to have been "exaggerated".  

He likewise took the view that the problem would not affect sales by Michelin in North America where it made one third of its sales revenue.  

At Deutsche Bank, analyst Gaetan Toulemonde, said "the effect on Michelin's image will be moderate."  

"The decision to recommend that the teams not race because of doubts about the tires is not necessarily negative. It could even be seen positively, for it suggests that Michelin would never sell a tire about which it had safety concerns."

Copyright AFP

Subject: French news

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