Michelin are Seeking a Strategic Cooperation with JD.com
October 10, 2018 – It is reported that, Michelin company are Seeking a strategic cooperation with JD.com (NASDAQ:JD), an e-commerce company in China, in order to reach strategic cooperation. Michelin will use the direct supply and exclusive supply of some products in China and the right to operate Michelin Tyreplus as bargaining chips (Michelin Tyreplus is an offline partnership system that Michelin has been operating in China for many years).
For the reasons behind this emergency strategic cooperation, analysts say that the first half of 2018 was not a good time for Michelin. The financial statements showed that Michelin Group had a net profit of 917 million euros in the first half of 2018, with 6% growth than the year before. But compared with 863 million euros in the first half of 2017 and 12% year-on-year growth, Michelin was in a weak growth. In 2017, Michelin announced plans to restructure around the globe, leading directly to widespread unemployment in France and the United States. The results of the cuts have not been mentioned in the financial report.
The sluggish sales performance of Michelin in China was not been mentioned in the financial statements either. Business insider said, although sales of gear of Michelin China in the first half of 2018 grew, it didn’t achieve this year’s goals of headquarters in France. One of the reasons is that other competitors have opted to interact with new retail channels online since 2017, but Michelin China has been relatively slow in this respect. If it is the fact, Bruno de Feraudy, the president of Michelin China, will be under the pressure from the shareholders of the headquarters.
Michelin’s other business in China has also been in the mire. Michelin Tyreplus, which has always been seen as “a burden on Michelin in China”, has never helped sales since its inception. Analysts pointed out that, after reaching cooperation with JD.com，Michelin would likely open Tyreplus to sell all categories of gear products, and ultimately throw this “burden” away. At that time, Tyreplus will formally draw a line with Michelin brand.
These are the reasons why Feraudy was eager to promote strategic cooperation with JD.com
However, as the cooperator of Alassande’s negotiation and cooperation, JD.com’s situation is not optimistic either. Not long ago, JD.com got into trouble over its founder, Richard Liu’s Sex scandal. Shares of JD.com plunged 7.47% in 24th Sept, hitting a bottom since 2013. Previously, JD.com and its founders were known for good family and noble social values. After the scandal, some companies and celebrities chose to keep silence and declined to comment on the incident.
If this strategic cooperation is reached, Michelin will become the largest company that openly express cooperation with JD.com since the recent scandal broke out. Analysts believe the move could lead to opposition from some feminist groups.
However, the aforementioned analysts pointed out that Michelin would probably choose not to cooperate with JD.com immediately, because in the current market of tire replacement of passenger cars in China, there is another major e-merchant group TMall.com, which is belong to Alibaba Group (NYSE:BABA). At now, TMall.com is competing fiercely with JD.com. Michelin is likely to choose between the two.
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