1. HAM BERGER STRATEGY CONSULTANTS Proudly presents:

2. The Conference

3. Hear from Michelin’s CEO and industry analysts

4. Be informed

5. Interact and recommend

6. Javier Fungairino as Neil Mullineux The World Tire Industry Analyst

7. Guillaume Beck as Edouard Michelin “Michelin Head Honcho!”

8. Sophia Liang as Amelie Tyred Ham Berger Consultant

9. Spencer Rosen as Phil Rubber Ham Berger Consultant

10. Antonio Paguio as Chuck A.Tire Michelin Global Solutions

14. Please welcome our first speaker: Mr. Neil Moulineux Tire Industry Analyst

15. History The tire industry was born at the end of the 19th century by providing bicycle tires. Mid 20 th - Dramatic quality improvement Dunlop… …rubber tire Goodyear… air-filled tire Michelin…. the removable tire

16. History In the 1990s after a price war companies were not able to differentiate. They were not able to innovate like in earlier years. They had to concentrate on: - Increase in productivity - Capacity shortage - Organizational changes Several tire makers formed alliances and joint ventures.

17. Industry Structure Tire: A commodity product In history, tire companies have achieve to create cheaper and longer lasting tires. Improvements in this industry are slow and mainly based on modern technology. Competitive advantage Capacity utilization, cost structures. Operations management, and research and development.

18. Competition Michelin, Bridgestone, Goodyear, 54 % Bertrand Oligopoly market - “the top ten firms - 80% of world production” Brands - development of run-flat tires (such as the Michelin PAX concept) Focus on the materials used, tire design, surface performance, winter tires….

19. Please welcome our honorable guest: Mr. Edouard Michelin Compagnie Générale des Etablissements Michelin (CGEM)

20. Corporate governance = Competitive advantage 2 Partners (+ 1 Interim) COMMANDITE FAMILY BUSINESS CORPORATE CULTURE MichelinVille, Education, Healthcare… IDENTIFICATION René Zingraff & Edouard Michelin

21. 1924, Edouard Michelin: “When a fact contradicts theory, we should opt for the fact.” 2002, Edouard Michelin: “We have one profession and one mission: contribute to long-term progress in the field of MOBILITY Place Euromaster TCI Promotion F1 Bibendum Challenge (China 2004) PriceProduct Innovation R&D

22. My Mistress = R & D Distribution Network T.O.U. (SBU)

23. Please welcome: Ms. Amelie Tyred Ham Berger Consultant

24. Quiz Which 2 of Porter’s 5 forces have minimal influence on the tire industry? Power of supplier? Power of buyer? Rivalry among existing competitors? Threat of new entrants? Threat of substitute?

25. Answers to the Quiz Consumer Minimal Threat of New Entrants Unattractive Industry Low margins Capital intensity Strong channel needed High tech & knowledge Consumer Minimal Threat of Substitutes High Demand for Vehicle Heavy truck freight needed esp. in developing countries Short-term: eco-friendly, run-flat tires Limited: maglev, hovercraft Which 2 of Porter’s 5 forces have minimal influence on the tire industry?

26. Power of Supplier Michelin’s raw material price went up 21% in 2003 Rubber prices expected to rise 10~15% in 2004 Tire manufacturers have low control over the price of raw materials  demand & supply

27. VS Power of Customer Segment Mix: Passenger Car- Light Truck and the Truck markets (accounted for 84.1% of Michelin’s sales in 2002) Replacement 70% Original Equipment 30% VS Loyalty Ratio: 65% in Europe 58% in North America Must shift production with car industry to growth markets Car makers squeeze suppliers for lower prices

28. Rivalry among Competitors

29. Please welcome: Mr. Phil Rubber Ham Berger Consultant

30. Michelin’s SWOT WeaknessesWeaknesses –No. 3 in Asian market –Time to market –Bureaucracy –Low productivity –Lower brand visibility due to lack of outlets StrengthsStrengths –Tech. innovations –Brand equity Bibendum –Value added services Tire-related Maps & guides –Global portfolio No. 1 in Europe and the World (sales) –Family business structure with leadership embracing change

31. Michelin’s SWOT ThreatsThreats –Job cuts changed the employment culture –Maturity of industry –Fierce competition –Raw material price fluctuations OpportunitiesOpportunities –Asian market especially China –High performance sector growth in Europe –SUV segment in the US market

32. Please welcome: Mr. Chuck A. Tire Michelin Global Solutions

33. Industry Review $70B tire market Projected 5% p.a. growth The tire market continues to grow but at a slower pace

34. 84% of tires sold are for cars, l-trucks & trucks Passenger cars, light trucks, and truck are the cash cows Industry Review

35. 88% of market is in Europe, N.A., Asia China 15% growth p.a. Asia, particularly China, is a key growth area

36. Michelin Update 47% of sales comes from Europe

37. Michelin Update Investments of €3.2b since 2000 –Build capacity of existing facilities –New developments such as China an Russia Michelin invests on higher returns

38. Recommendations SWOT Value Chain Porter’s 5 Forces MICHELIN MICHELIN

39. Growth Recommendations OEM market to build brand loyalty Replacement market for high growth areas (SUVs and upscale vehicles) Growth in Asia and Russia Grow awareness of other brands

40. Operations Recommendations C3M process = flexibility & cost-effective Inventory reduction Productivity improvement Outsourcing Non-core functions Flexibility and Control –Price accordingly –Targets adjusted for business environment –Curb volatility by hedging –Invest in rubber tree plantations

41. Competitive Advantage Recommendations Innovation, design, quality & marketing Efficiency and speed to market Customer satisfaction Employees as the greatest asset Corporate culture as the main driver of competitive advantage!

42. Some Parting Words: Mr. Edouard Michelin Compagnie Générale des Etablissements Michelin (CGEM)

43. " A company’s performance is not assessed only in terms of its economic results. It is also measured by its ability to develop its employees and to take its place harmoniously in the communities and Society around it." Edouard Michelin, April 2003 Parting Words

44. What do you think? What do you think? Open Forum Open Forum