Written by Eric Le Corre, Managing Director of Michelin Tyre PLC
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You cannot open a newspaper or visit a news site without seeing another report about economic performance and conditions for manufacturers. Commentary has wavered between a bleak outlook for manufacturing to a slightly more positive suggestion that the decline in UK manufacturing slowed in August.
The Markit/CIPS manufacturing Purchasing Managers’ Index, which dropped to 45.4 last month, indicated a fall in orders. However the manufacturing PMI, which jumped to a four-month high of 49.5 in August, close to the 50 mark that separates growth from contraction, suggests the situation is stabilising.
Whichever way you look at it there are nuggets of success in UK manufacturing, particularly in the automotive sector. GKN reported a huge increase in sales. Michelin Group, too recently saw a half-yearly profit rise by 37 percent. Furthermore, automotive manufacturing turnover for 2011 was £55 billion - a 12 percent increase on 2010, according to the Society of Motor Manufacturers and Traders (SMMT).
Regardless of sector, manufacturers in Britain are all looking to save on operational costs and energy is no exception. Global companies operating in the UK will also be aware, when they compare their energy bills to other entities that energy charges continue to rise well above European neighbours. Illustrating this issue, a recent survey by the EEF of manufacturers showed managing energy use was a top priority. While some larger companies are working towards going off the grid, for many this simply isn’t an option and rising energy costs may well end up driving companies out of the UK altogether.
In order for UK manufacturing to flourish, the government needs to consider the pressures that manufacturers are under in terms of energy costs. Manufacturing is incredibly energy intensive and is traditionally one of a company’s biggest expenditures at around 20 percent of overall outlay. There is a real pressure to ensure the price increase isn’t passed on to the customer, so it often gets absorbed by the manufacturer into profits.
In the meantime, it is also down to the company to foster clean energy practices. Michelin has gone out of its way to improve its energy performance. Although the manufacturing process accounts for less than10 percent of a tyre’s environmental impact (the remainder is during its use on a vehicle), to manage the environmental performance of Group plants, a dedicated metric, known as the Michelin Environmental Footprint, reviewed by PricewaterhouseCoopers, tracks the company’s quarterly progress against its target of reducing the plants’ footprint by 45 percent by 2016 compared with 2005. As of 2011, it had already shrunk by 33 percent.
The UK has contributed to this achievement through its efforts to lower its dependence on the energy grid, instead using power generated through wind turbines, which have been in place at its Dundee site for six years and a project is well underway at Ballymena for the same solution.
By taking the initiative to reduce energy consumption and costs, Michelin has adopted clean energy practices which help to reduce overall expenditure. This responsible manufacturing approach is also passed on to the customer, in the form of fuel-efficient tyres, which globally since their introduction in 1992, have been responsible for reducing vehicle CO2 emissions by 38 million tonnes.
With an incredibly complex and bureaucratic web of green policies to adhere to, it really is a case of businesses driving their own green agenda. At the same time, the government needs to re-assess its policies to ensure they are actually pushing targets forward.
With more than 111,000 employees and sales organisations in more than 170 countries, Michelin is the worldwide leader in tyre manufacture. Dedicated to the improvement of sustainable mobility, Michelin designs, manufactures and sells tyres for every type of vehicle, including aircraft, cars, bicycles, earthmovers, farm equipment, trucks, motorcycles and even the US space shuttle. Michelin has 70 production sites in 18 countries throughout five continents. The Company also publishes travel guides, hotel & restaurant guides, maps and road atlases, and offers electronic mobility support services on ViaMichelin.com. Research and development is undertaken in technology centres in Europe, USA and Japan.