Michelin Hikes Tire Prices as Raw Materials Rise
The increases, to take effect between March 15 and July 1, will hit both consumers and businesses, likely adding to price inflation and possibly slowing economic growth.
The European Central Bank, which keeps a close eye on price developments, is due to discuss interest rates on March 6.
The European Commission said on Thursday that euro zone economic growth was expected to slow to 1.8 percent this year from 2.7 percent in 2007, while price inflation would remain above the 2.0 percent ECB target at 2.6 percent.
Rubber prices are up due to disappointing harvests and insatiable demand from emerging economies such as China. Other products such as grain and milk are also up and the world’s largest food group, Nestle
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Michelin, which vies with Japan’s Bridgestone <5108.T> for the title of the world’s biggest tire group, said the price for tyres for passenger cars and vans would rise 3.5 percent.
In Britain and the states of the former Soviet Union, the rise would be between 6 and 7 percent as their currencies weakened against the dollar.
“We do this regularly, sometimes in the United States, sometimes on other markets. It is part of our policy to onpass the higher raw material prices,” spokeswoman Fabienne de Brebison said.
Truck tire prices will rise 3.9 percent in continental Europe and by 8.7 percent in Britain while tyres for agricultural equipment will rise by between 2 and 5 percent in continental Europe and between 6 and 9 percent in Britain.
Michelin shares were 1.5 percent lower at 60.89 euros at 0947 GMT, adding to a 21 percent decline so far this year as analysts fear the higher input and slower economic growth will erode the family-controlled group’s profit margin to below its 2010 targets despite a drastic cost cut plan.
“Normally a rise in prices is a reason to support the share price,” said Francois Maury, an analyst at brokerage Oddo.
“There was a hike in the U.S., in Japan so we were waiting for the next rise in Europe and here it is,” he added.
Michelin said last week, when it reported in-line 2007 results, that it expected a negative impact of 200 million euros in 2008 from higher raw material costs.
Bridgestone earlier this week said it expected a 22 percent decline in its operating income this year due to higher raw materials prices.
Smaller German rival Continental
The Dow Jones Automotive Stoxx inxdes <.SXAP> was down 1.95 percent at 0942 GMT, after a 15 percent decline so far this year.
(Editing by Jason Neely/David Cowell)