rapport 1998 anglaispassenger tire co. ltd (china) msf tire and rubber, inc. (philippines) michelin...

C o n t e n t s

The Michelin Group and Selected data 2

1998 Business background 8

Stockholders’ Meetings,June 11, 1999

Spec ia l Meet ing of Stockholders

Managing Partners’ report 12

Independent Auditors’ special report 15

Supervisory Board’s report 16

Annual Meet ing of Stockholders

Managing Partners’ Report

Main Group developments 18Capital investments 22

Research and development 22New products 24

Compagnie Générale des Établissements Michelin 27Operations and financial results of associated companies 28

Consolidated financial statements 401999 outlook 41

Propositions 41

Independent Auditors’ general report 44

Independent Auditors’ special report 45

Supervisory Board’s report 46

Financial statements

Company financial statements in FRF 49Company financial statements in EUR 63

Consolidated financial statements in FRF 77Independent Auditors’ report

on the consolidated financial statements 89Consolidated financial statements in EUR 91

2

®

Mo re t h a n 80 m a n u f a c t u r i n g f a c i l i t i e s i n 1 9 c o u n t r i e s

47 i n Eu r o p e

7 i n G e r m a n y4 i n Sp a i n

24 i n F ra n c e2 i n Hu n g a r y4 i n I t a l y1 i n Po l a n d4 i n t h e Un i t e d K i n g d o m1 i n Sw e d e n

22 i n No r t h Am e r i c a

4 i n C a n a d a16 i n t h e U . S . A .

2 i n Me x i c o

4 i n S o u t h Am e r i c a

2 i n B ra z i l2 i n C o l o m b i a

7 i n A s i a

1 i n C h i n a1 i n Ja p a n1 i n t h e Ph i l i p p i n e s4 i n T h a i l a n d

2 i n A f r i c a

1 i n A l g e r i a1 i n Ni g e r i a

6 r u b b e r p l a n t a t i o n s i n B ra z i li n Ni g e r i a

Te c h n o l o g y c e n t e r s E u ro p eU . S . A .Ja p a n

Commercial of f ices in more than 170 countries

The Michelin Group 1n 1998

3

■ 28,000 products marketed

■ Daily production:

830,000 t i re s

76,000 i n n e r t u b e s

1 ,200 t o n n e s o f s t e e l

m o re t h a n 4 m i l l i o n k i l o m e t e r s o f c a b l e

88,000 w h e e l s

70,000 m a p s a n d g u i d e s

The 1997 world tire marketSource : Tire Busi

ness,

Sep

tem

ber

1998

Michelin 18.3 %

Bridgestone 18.6 %

Goodyear 17.1 %

Continental 6.3 %

Sumitomo 5.5 %

Pirelli 4.4 %

Others 29.8 %

S

4

1998 1997

127,241 123,254

Average number of employees

Organizat ion summary

1998 F inanc ia l resu l ts

Compagnie Générale des Établissements Michelin (France)

Michelin North America, Inc. (United States)Michelin Aircraft Tire Corporation (United States)Michelin North America (Canada), Inc. (Canada)Michelin Tyre Public Ltd Co. (United Kingdom)Michelin Reifenwerke KgaA (Germany)Michelin Kronprinz Werke GmbH (Germany)Neumáticos Michelin S.A. (Spain)Società per Azioni Michelin Italiana (Italy)Stomil-Olsztyn S.A. (Poland) (1)Taurus Truck Tyre and Trading Ltd (Hungary)Taurus Agricultural Tyres Ltd (Hungary)Uniroyal S.A. de C.V. (Mexico)Sociedade Michelin de Participaçóes Indústriae Comércio Ltda (Brazil)Industria Colombiana de Llantas S.A. (Colombia) (2)Michelin (Nigeria) Ltd (Nigeria)Michelin Siam Co. Ltd (Thailand)

Siam Tyre Phra Pradaeng Co. Ltd (Thailand)Siam Tire Industry Co. Ltd (Thailand)The Siam Steel Cord Co. (Thailand)Michelin Okamoto Tire Corporation (Japan)Michelin ShenYang Rubber Components Co. Ltd (China)Michelin ShenYang Tire Co. Ltd (China)Michelin ShenYang Truck Tire Co. Ltd (China)Michelin ShenYang Light Truck & Passenger Tire Co. Ltd (China)MSF Tire and Rubber, Inc. (Philippines)Michelin Recherche et Technique S.A. (Switzerland)Michelin Americas Research & Development Corporation (United States)Commercial companies and theEuromaster dealerships in Europe

(1) quoted on the Warsaw stock exchange(2) quoted on the Bogota stock exchange

Compagnie FinancièreMichelin

(Switzerland)

Manufacture Françaisedes Pneumatiques Michelin

(France)

Pardevi(France)

Industrial, sales and research companies

outside France

Other industrial and commercial companies

in France

Stockholding in Peugeot S.A.

1998 1998 1997in EUR million in FRF million in FRF million

Net sales 12,486 81,900 79,692Trading income 1,073 7,040 7,174Financial expense (220) (1,442) (1,502)Ordinary income 853 5,598 5,672Exceptional income 46 303 134Amortization of goodwill (20) (133) (128)Taxes on income (308) (2,018) (1,570)Share of income of affiliates 2 12 3Net income 574 3,763 4,111

of which:Group 536 3,513 3,883Minority interests 38 250 228

Cash flow 1,246 8,176 8,422

Selected data

5

Net sales by geographic areain FRF billion

Trading result and net resultas % of net sales

Financial debt(incl subordinated)/Stockholders’ equityas %

Net capital investmentsin FRF billion

Cash flowas % of net sales

Trading result

Net result

92 93 94 95 96 97 98

92 93 94 95 96 97 98

92 93 94 95 96 97 98

92 93 94 95 96 97 98

92 93 94 95 96 97 98

100

80

60

40

20

0

Rest of theworld

North America (incl. Mexico)

Western Europe

France

6.4

-0.02

3.2

3.4

289

441

300

202

131

65 65

2.8

2.1

3.1

4.1

5.4

7.1

7.6

1.9

6.7 6.6

11.7

10.610

-6.2

2.02 4.5 4.4 5.2 4.6

7.1

8.69.8

9 8.6

Description of stock

B share Par value FRF12Quotation: Paris stock exchange, monthly settlement marketMin. dealing quantity 1SICOVAM code 12 126CAC 40 indexMONEP: continuous quotation

A capital share Par value FRF12Quotation: Paris stock exchange, spot marketSICOVAM code 3 126

A jouissance share Par value FRF12Quotation: Paris stock exchange, spot marketSICOVAM code 3 127

Number of shares issued at December 31:

1994 1995 1996 1997 1998

B share 107,422,081 114,481,094 119;380,905 136,142,968 136,965,873

A capital share 375,000 375,000 375,000 375,000 375,000

A jouissance share 375,000 375,000 375,000 375,000 375,000

Michelin B share price (all values in FRF)

1994 1995 1996 1997 1998

High 274.00 232.90 282.00 403.00 408.90

Low 187.00 185.00 192.30 274.80 187.00

Last trading day of preceding year (closing price)209.80 194.30 195.30 280.10 303.00

Last trading day of year (closing price)194.30 195.30 280.10 303.00 223.50

Change on year - 7.40 % 0.51 % 43.42 % 8.18 % - 26.24 %

Consolidated earnings per share

Net income after taxes, Group share

1994 1995 1996 1997 199811.93 24.26 24.07 28.36 25.51

Note : The earnings per share is calculated by dividing annual income by the number of shares issued at the end of the year.

25

35

45

55

65

75

Jan 3, 94 Jun 30, 94 Dec 29, 94 Jun 30, 95 Dec 28, 95 Jun 28, 96 Dec 26, 96 Jun 26, 97 Dec 23, 97 Jun 25, 98 Dec 21, 981606

2106

2606

3106

3606

4106

4606

Michelin B in euros CAC 40 index in points

Comparison, Michelin B share (in euros) and the CAC 40 index

6

Michelin on the stock exchangeMarket capitalization at December 31, 1998: FRF30.7 billion

B share

CAC 40

7

Aerial view of a rubber plantation

8

Worldwide economic growth was generally weaker in 1998, with contrasting trends in thedifferent geographic zones.

In the developed economies the situation remained relatively favorable, with sustaineddomestic demand in North America and in the Euro zone countries. By contrast, Japan wasin recession from the end of 1997. Through the year, price inflation in the industrialized countries continued to reduce.

In the emergent economies there was a sharp downturn in activity. Recession was widespreadin Asia although there have been some signs of stabilization, principally in South Korea andThailand, since the middle of the year. Russia suffered a severe financial crisis. The South American economies resisted the downturn in 1998 but risk falling into recession this year.

Having achieved a growth rate of 10% in 1997, world trade slackened in 1998, with growth of 4.6%. This was due mainly to the recession in Japan and the sharp contraction ofdomestic demand in south-east Asia.

The exchange rates of the eleven countries who were founder members of the euro fromJanuary 1, 1999 held up well despite the financial crisis which in 1998 affected, in additionto the Asian currencies, the rouble and the various Latin American currencies. Having startedthe year strongly, the US dollar eventually lost ground against most of the major currencies.Between the beginning and end of the year it lost 6% on the French franc, 6.6% on theDeutsche Mark and 12.6% against the Yen.

Economic s i tuation

Main industrializedcountries Southeast Asia

Central andEastern Europe Latin America

Source: IMF, Economic Census

GDP growth

1997 1998 1999(est.)

1997 1998 1999(est.)

1997 1998 1999(est.)

1997 1998 1999(est.)

2.8 %2.1 % 1.9 %

4.1 %

-7.6 %

-0.6 %

3 %

-0.3 %

-1.1 %

5.2 %

2.1 %

-1.2 %

1998Business background

9

The situation in the auto industry was one of considerable contrast in 1998. Production wasincreased in North America and Western Europe whereas it was down sharply in Asia andSouth America.

Light vehic les

15.5 million light vehicles were sold in the United States in 1998, an increase of 2.8%and close to the 1986 record sales of 16 million. Sales in Canada remained stable compared with 1997, the sales for that year having been the highest in the last decade.In Mexico, sales were up by more than 30% although despite the favorable conditions,production at the Alena plant, affected by strikes, was down by 2% for passenger carsand up by 1.4% for sports/utility vehicles. In total, the production of light vehicles wasdown slightly, by 0.3%, on that of 1997.

In South America, because of the collapse of the Brazilian market, the output of lightvehicles was down by 18%.

Production in some of the central and eastern European countries, notably Poland, CzechRepublic and Slovenia, was up strongly while in Russia, it fell by more than 10%.

The market for light vehicles in Western Europe was up by 7%, setting a new record.With the exception of Norway and Italy, where strong growth in 1997 was underpinnedby governmental incentives, all markets were up. Production followed the market trendand with growth of more than 5%, total output exceeded 16 million.

The slowdown in Asia which became apparent in 1997 gathered momentum in 1998 andthere were sharp reverses in South Korea, Thailand, Indonesia and Malaysia. Japaneseproduction was down by 8% following a stagnation of exports and weakened domesticdemand.

Heavy vehic les

United States truck sales were up by almost 14% in 1998. For the very heavy trucks salesgrowth reached 17%, setting the highest market level for thirty years, and sales ofmedium trucks were up by 9%. In these favorable conditions, North American production increased by 11%, having already been up by 16.5% in 1997.

In Western Europe the strong demand for trucks in the second half of 1997 continuedinto 1998 and led to a new production record, up by 18%.

Truck production in central and eastern Europe was lower, mainly because of a drop of20% in Russia.

Japanese truck demand was down by more than 30% and this, aggravated by a sharpdrop in exports to other Asian countries, led to a fall of 40% in truck production compared with 1997.

The automotive industr y

0

100

200

300

400

500

1992 1993 1994 1995 1996 1997 1998

North AmericaWestern EuropeJapan

Truck production(thousand units)

(est.)

5

10

15

20

1992 1993 1994 1995 1996 1997 1998

North AmericaWestern EuropeJapan

Light vehicle production(million units)

(est.)

Prices of the raw materials used in tire manufacture continued to fall in 1998, at a fasterrate than in 1997.

The main cause for the fall was a drop in the price of natural rubber, in the order of 20%.A contribution to this situation came from the crisis in Asia, with reduced demand fromthe principal consumers. In addition, there was considerable volatility in the natural rub-ber price due to climatic factors.

There was a collapse in crude oil prices and the annual average was down by more than30% compared with 1997. This was partially reflected in the prices of derived raw materials such as carbon black, synthetic rubbers, monomers in particular, and somechemical products.

Strong competition from Asian producers operating in Western markets had an effect onsteel prices, mainly metallic reinforcements, and on chemical products. The price of textile reinforcements, which trended downwards in 1997, remained flat in 1998..

Raw mater ials

265

245

225

205

185

165

145

125

1051992 1993 1994 1995 1996 1997 1998

10

Following a record year in 1997, the North American demand for all types of tires continued to increase in 1998. In Western Europe the 1997 recovery continued in 1998.

By contrast, other markets fell back. The growth apparent in South America during thefirst half of 1998 went into reverse during the second. In Africa and the Middle East somecountries suffered from the weakness of crude oil prices, to the extent that domesticdemand was reduced in the second part of the year.

Light vehic le t i res

North American markets continued to expand in 1998, at a slightly lower pace than inthe previous year. Original equipment sales were affected by strikes in the motor industry while at the same time, replacement market sales were up strongly.

The pattern in Western Europe was one of sustained demand, both in the original equipment and replacement markets.

In Japan, the original equipment market fell throughout the year despite a weak improve-ment in the last quarter. The replacement market was down only slightly compared with1997 and showed some recovery towards the end of the year.

Truck t i res

Sales trends for truck tires showed a marked contrast between regions. Demand was verystrong in Western Europe and North America, mainly for original equipment. In Africa andthe Middle East, market trends were also favorable whereas in Asia, tire markets remained ata depressed level. Markets in South America and Eastern Europe trended downwards in thesecond half of the year.

The t ire industr y

Natural rubberSingapore price (cents/kg)

0

50

100

150

200

250

300

350

1992 1993 1994 1995 1996 1997 1998

Tire markets(million units)

North America

Europe

Japan

Asia excl. Japan

South America

Rest of the world

(est.)

11

Tapping rubber

12

Ladies and Gentlemen,

We have convened this Special Meeting to submit resolutions of a very varied nature for yourapproval. The first concerns the Managing Partners of the Company, the second refers to areunification of Company stock and the final two resolutions relate to, in the one part, theconversion of capital stock into euros and for the other part, the possibility to cancel treasury stock.

The first proposal concerns the renewal of M. François Michelin’s appointment as a Managing Partner.

As you will be aware, the Company’s Articles prescribe an age limit for the holding of thisoffice, a limit which M. François Michelin will have reached at the end of the Meeting convened to approve the 1998 accounts. The Articles do, however, provide for the possibilityof extending the appointment for a period of three years.

Messrs Edouard Michelin and René Zingraff have requested that M. François Michelin remainsa Managing Partner for a further three years.

M. François Michelin has accepted this but it has been decided by the three Managing Partners that it is now time for M. Edouard Michelin to assume full responsibility as head ofthe Company at the conclusion of the Meetings on June 11 next.

It is in these circumstances that the renewal of M. François Michelin’s appointment as aManaging Partner is submitted for your approval.

The second proposition relates to a reunification of Company stock and this Meeting hasbeen preceded by Special Meetings of each of the three categories of stockholders, that isthose holding A jouissance, A capital and B shares.

At these Special Meetings we have given the reasons which militate in favor of a reunificationof all of the Company stock into one category. There are in addition, practical difficulties inamending the provisions in the Articles to cater for the substitution of the euro for the French franc, at a parity of FRF6.55957.

You are reminded that the A jouissance, A capital and B shares have the same voting rightsand the same nominal value of FRF12 but, in the Articles, there is a distinction between them:

- the A jouissance shares were redeemed to the extent of FRF2 per share in 1924.

M a n a g i n g P a r t n e r s ’ r e p o r t

M a n a g i n g P a r t n e r s ’ r e p o r t ( s p e c i a l )

C O M P A G N I E G É N É R A L E D E S É T A B L I S S E M E N T S M I C H E L I N

Special Meetingof Stockholders

13

- the A capital shares, which are fully paid, have since then been compensated by a first dividend in distributions. This first dividend is presently equal to 5% of FRF2, i.e. 0.10 francsper share. In addition the A capital shares, because they were not partially redeemed, eachhave the right to a priority reimbursement of FRF2 in the event of the liquidation of the Company.

- the B shares also have the right, but second in priority to the A capital shares, to the samepayment of FRF2 in the event of the liquidation of the Company.

This is why the stockholders concerned have been asked to agree, at these Special Meetings,that the differences between shares be eliminated as, over time, they have become of littlesignificance, given the volume of reserves supporting the shares.

With a view to eliminating the differences, we submit the following procedure for yourapproval:

- for the A jouissance shares, the refund by stockholders of the sum of FRF2 per share, thusrestoring them as fully paid. This will be done by deducting this amount from the dividend,including tax credit, payable in respect of 1998 and transferring the total sum to capitalreserves.

- for the A capital shares, suppression in future of their right to a first dividend of FRF0.10,which originated when the A jouissance shares were partially repaid.

- for the A capital and B shares, because of the recapitalization of the amount originallyrepaid on the A jouissance shares, suppression of their right to a priority repayment of FRF2in the event of liquidation of the Company.

In conclusion, these proposals are now possible because the Company no longer has anyconvertible bonds in circulation. They will lead to a single price quotation for all of the shareson the Monthly settlement market of the Paris stock exchange, something which many ofyou have wanted.

With the establishment of the euro, we have decided that from the beginning of 1999 thecompany’s financial records will be kept in this currency. You will be aware in any case thatshare prices on the Paris stock exchange are now quoted in euros. It seems appropriate, therefore, to propose the conversion of capital stock and the nominal value of shares toeuros.

The nominal value is presently FRF12 and will be converted to the nearest euro, without decimals, i.e EUR2. This will result in an increase of capital stock, corresponding to the rounding of FRF1.11914 per share, by a transfer from the account “Paid in excess of par” inthe sum of FRF154,123,342.11, or EUR23,495,952.04. Capital stock will be, therefore,EUR275,431,746 divided into an unchanged number of shares, 137,715,873, each of EUR2nominal value.



14

The conversion would be carried out concurrently with the proposed reunification of sharesand clause 6 of the Articles, relating to the amount and composition of capital stock, wouldbe altered in consequence.

Finally, as the law now permits, we propose that you delegate to us the powers to canceltreasury stock up to a maximum limit of 10% capital stock, in periods of twenty-four months.We mention in our report to the Annual Meeting that this cancellation, forming part of a program to purchase Company shares, is designed to give us flexibility in the optimization ofStockholders’ funds and earnings per share. Delegation of this power would enable us totake advantage of opportunities which may arise, although no specific decision has yet beentaken in this matter.

We invite you to adopt the resolutions put forward for your approval.

Clermont-Ferrand, France, March 12, 1999

François MICHELIN Edouard MICHELIN René ZINGRAFF



15


In our capacity of Statutory Auditors of Compagnie Générale des Établissements Michelinand in carrying out the duties in accordance with article 217.2 of the law of July 24, 1966,we present our report on the reduction of capital which would follow the cancellation oftreasury stock held by the Company in order to optimize Stockholders’ funds and earningsper share.

We have examined the proposed authorization for the reduction of capital following the purchase by your Company of its own shares, applying accepted professional standards tothe extent we considered necessary.

Your Managing Partners propose that you delegate to them the responsibility for carrying outthese operations.

We have no comments to make on the proposal to cancel treasury stock and the resultantreduction of capital that this would entail. In accordance with article 217.2 of the law of July24, 1966, we will prepare a supplementary report at the time these operations are carriedout.

Paris, France, April 7, 1999

Dominique PAUL Stéphane MARIE

Statutory AuditorsMembers of the Compagnie Régionale de Paris

I n d e p e n d e n t A u d i t o r s ’ s p e c i a l r e p o r t


I n d e p e n d e n t A u d i t o r s ’ s p e c i a l r e p o r tReduction of capital by the cancellation of treasury stock.

16

Ladies and Gentlemen

We do not need to comment further on the reasons underlying the decision of your Managing Partners, with the full agreement of the Société Auxilaire de Gestion, to extend M. Francois Michelin’s term of office as a Managing Partner, for a period of three years. Wecan only welcome this wise and appropriate decision very favorably.

We invite your support for the resolution to this effect.

In an entirely different matter, you are asked to vote in favor of a reunification of the A jouissance, A capital and B stock.

We share with your Managing Partners the wish to implement this project, the imbalancebetween the numbers of A and B shares having grown over the years. The divergence betweentheir respective share prices is considerable and their quotation on different stock marketsalso leads to problems for the intermediaries charged with stock exchange transactions.

The reunification, now legally permissible, also responds to requests that a number of youhave made.

You will have seen that this operation does not in any way alter the amount of capital or thenumber of shares issued and moreover, has no effect on the double vote which possiblyapplies to your stockholding.

The introduction of the euro as legal currency leads to the conversion of the capital and thenominal value of shares into this currency. The proposal of your Managing Partners to fix thenominal value of shares at the nearest equivalent whole number of euros will result in anincrease of the Company’s capital stock, by means of a transfer from issue premiums.

Finally, you are asked to vote on the delegation of powers to your Managing Partners to pos-sibly cancel all or part of the Company’s treasury stock, acquired by virtue of authorizationsgiven by Annual Meetings. As your Managing Partners’ report points out, it is to enable themto take advantage of opportunities which may arise in this regard. We consider this proposalto be timely; it is also the subject of a special report from the Statutory Auditors.

We invite you to adopt the resolutions submitted for your approval.

Clermont-Ferrand, France, April 12, 1999

Daniel MICHELIN

S u p e r v i s o r y B o a r d ’ s r e p o r t

S u p e r v i s o r y B o a r d ’ s r e p o r t ( s p e c i a l )


17

PAX SYSTEM.


M I C H E L I N G R O U P

18

Michelin operations in 1998 showed an increase of 3.8% in sales volume compared with theprevious year, the increase being greater in original equipment sales than in replacement. Thesales progression was steady through the year, thanks to a production increase of more than7%.

For passenger car and light truck tires, market growth was again strong in Europe but slowing in North America, mainly in original equipment. Asian markets were in decline.

World production of light vehicles was down by approximately 2% because of the slowdownin Asia, South America and the emergent countries. Growth in Europe, however, again madean important contribution. In total, the volume increase in Group sales worldwide to the original equipment market was 1.5%.

Replacement markets expanded in both Europe and North America. In Japan, however, theadverse trend which was apparent at the end of 1997 continued into 1998. In these tradingconditions, Michelin sales in Europe progressed at a slower pace than the market, given alimitation in production capacity for top-of-the-range car tires. North American productionvolume was reduced as the result of a strike at the Fort Wayne plant and supplies were notentirely adequate to meet demand. Sales in Japan continued to increase and this led to ahigher market share. For all markets and regions the total of Michelin sales was slightly higherthan in 1997.

Truck tire markets evolved in a different fashion according to the geographic zone: stronggrowth in Europe and North America, collapse in Asia, growth then setback in the second

Main Group Developments


Edouard Michelin François Michelin René Zingraff


We have pleasure in presenting the Company’s annual report for 1998,in accordance with clause 25 of the Articles.

Annual Meetingof Stockholders



19

half-year in South America, healthy trend in Africa and the Middle East. Against this background Group sales reached a new record in 1998 despite the strain on productionresources.

Michelin strengthened its position in original equipment in the buoyant West European market. Although production capacity was increased significantly, sales to the replacementmarket were restricted by product availability. In view of the importance and potential ofretreading in Europe, operational structures were combined.

The robust growth that was posted in 1997 by original equipment sales in North Americacontinued and, following this trend, Group sales were up by more than 20%. In the replace-ment market, sales were unable to derive full benefit from the trend, given the availability ofproduction capacity. The Group was active in the retreading sphere with the setting-up of sixteen units.

Group sales in South America suffered as a result of the economic setback in Brazil. Theacquisition of Industria Colombiana de Llantas S.A., Icollantas, a Colombian company, reinforced Michelin’s position in the Andean Pact countries, adding conventional tires to thesales lines. Retreading was developed in Brazil with both the establishment and technicalapproval of new units.

Asian sales were relatively good and the Group strengthened its position in the radial tiremarket, notably in Thailand and Japan. Concurrently, sales of conventional tires were downsharply.

Overall, Michelin’s 1998 sales of truck tires showed a volume increase of 4.5%.

Earthmover tire markets worldwide remained flat in 1998, influenced by the sharp fall inore prices and the crisis in Asia. Despite this, Group sales volume was up by more than 10%,in both original equipment and replacement. Market shares, already high in original equip-ment, were increased further.

The move towards the use of radial tires in Europe reinforced the Group’s market position.

North American markets were buoyant and Michelin’s market share was up in original equip-ment and stable in replacement. Production commenced ahead of schedule at the Lexington,South Carolina plant and forecasts were uprated. This plant will give Michelin the opportu-nity to improve its market share further in original equipment.

In the rest of the world, the main features were the significant increase in Michelin sales inAustralia and in South America for the very large tires, ahead of the market trend.

Michelin was successful in its development strategy for the large dumper segment, with thelaunch of 80 series low pressure and X Quarry tires.

Global sales volume was up by 11.5% in 1998, including deliveries to public works projectsand for materials handling.

Agricultural tire sales continued to progress, mainly in Europe and North America. Implementation of the multi-brand strategy, centered on the Michelin, BFGoodrich, Kléber,Stomil-Olsztyn and Taurus brands, contributed to the favorable trend.



20

The West European replacement market expanded once more and Group sales were up, bolstered by a good performance in the second half-year. Market shares increased, particu-larly for the Michelin brand.

Group sales in North America were maintained in original equipment and increased in thereplacement market, which was very competitive and experienced a sharp downturn in thefourth quarter. The launch of the BFGoodrich brand was a solid success.

In central and eastern Europe, sales were adversely affected by the deteriorating economicsituation through the year, with difficulties apparent in Russia

In total, sales tonnage was up slightly. Production was up, mainly to support the commercial offensive in North America. A new unit for the manufacture of Michelin andKléber branded tires started up at the Nyíregyháza site in Hungary. This additional capacity for standard agricultural tires will allow the West European plants to concentrateon the technically advanced lines for which there is a growing demand from customersin Europe and North America.

Two-wheel tire sales volume increased significantly, particularly outside Europe. TheGroup actively promoted its motor-cycle and scooter products in original equipment andthe trend towards the higher-performing top-of-the-range tires has continued.

Group sales of motor-cycle tires increased in Europe, where regulations favor the 125 ccengine size.

Very brisk demand for scooter tires in both original equipment and replacement resultedin a significant increase in sales.

In generally dull markets for bicycle tires, Group sales were down in replacement but higherfor original equipment premium products. The new Axial line of cyclosport tires received a good response, particularly in the United States where market share increased.

Sales of Aircraft tires were maintained in the principal world markets. Net sales were upby more than 7% despite strong pressure on prices, specifically in the commercial aviation sector. The share of total sales accounted for by radial tires increased to 26%. A geographic reorganization of production facilities was carried out in the United Statesand France, in order to reduce costs and improve the competitive position. The develop-ment of retreading continued at sites in Cuneo, Italy and Nong-Khae, Thailand.

The main Suspension Systems activities developed as follows:

In the market for passenger car wheels in aluminum, Michelin is newly represented andit presented the first PAX wheel, to be marketed in 1999. To mark the Bibendum centenary, Michelin designed a cast aluminum wheel with the center disk in the imageof Bibendum. It was marketed in replacement and is an illustration of the best foundry

Airbus A300 landing

Bibendum wheel in cast aluminum



21

technique. Sales of truck wheels were up sharply, with market share gains and the commercialization of a wheel with a protected valve continued.

The fitted assemblies business continued to increase, particularly within the frameworkof the joint venture with Continental, named Eurofit. Since the commissioning of a center at Cologne, Germany, and the acquisition of another at Küngalv, Sweden, Eurofitnow has six centers in Europe.

As part of the Michelin policy in the field of anti-vibration mountings, a key componentin the connection between a vehicle and the ground, the subsidiary Caoutchouc Manufacturé et Plastiques has been re-named Michelin AVS, Michelin Antivibration Systems, from the beginning of this year. From now on, products will be marketed underthe Michelin label, with the Kléber Industrie brand reserved for certain specific markets.A number of anti-vibration products have been developed for future vehicle designs andproduction of support rings for the PAX system has commenced.

In the Primary products activity, the natural rubber sector has 23,500 hectares spreadbetween six plantations, two in Brazil and four in Nigeria, managed for the supply ofnatural rubber to local Michelin tire plants. Action has been taken to reduce costs and toimprove yields, following the fall in market prices. In the course of renewal of old plantations, 400,000 trees were planted in 1998, covering 800 hectares of plantationand replantation. Additional to this was the maintenance of 8,680 hectares of new plantation, being brought into production progressively. Programs are being followed toimprove rubber yields and the profitability of plantations, with more emphasis beinggiven to cultivation of plants associated with the hevea.

Tourism services has continued its policy of market segmentation and the developmentof publications in foreign languages. A major event was the launch of the NEOS touristguides collection, which was well-received by customers. Development of the existinglines continued with, in total, 75 new issues. Two additional CD Roms were introduced,for navigation systems. Volume sales of paper products increased by close to 4% and thenumber of prepared itineraries by more than 6%. In total, sales were markedly higher.

In summary, the outline of trends in the principal world markets shows that demand inEurope was strong, where Michelin sales volume was up by nearly 7%, but more restrained in North America, where Group sales increased by 1.5%.

The pattern of Michelin sales in the rest of the world was one of contrast: strong growth in Japan and Africa, growth then setback during the year in South America, weakin the Middle East, down in other Asian countries with, however, a hint of recovery at theyear-end.

Earthmover tires and Truck tires posted the strongest sales volume growth.

Preparation of fitted assembliesGand

Manufacture of anti-vibration products Decize

NEOS tourist guides



22

In order to meet demand, considerable work was undertaken to increase production capacity:extension of continuous working in European passenger car and light truck plants, manu-facturing specialization, adaptation of tooling for the production of top-of-the-range tires.

In 1998, Group capital investments related primarily to:

- increasing production capacity for finished and semi-finished products to respond toincreased demand for truck, passenger car, earthmover and agricultural tires. Invest-ment was worldwide.

- expanding retreading activities significantly by setting-up franchised units, mainly inNorth America,

- adaptation of tooling to cater for the demand for top-of-the-range truck and passen-ger car tires,

- new acquisitions, notably of Icollantas in Colombia to strengthen Group presence inSouth America,

- implementing the C3M production process, mainly in the United States and Brazil,

- development of commercial activities and logistics improvement.

There were asset disposals by some Group companies in 1998. The reorganization of storage and distribution facilities led to the sale of a certain number of depots and

warehouses in Europe.

Total investment in tangible and intangible assets, net of corresponding disposals, amountedto FRF7.15 billion in 1998, up more than 30% relative to 1997.

Remembering the very high level of performance a tire provides, its usage is taken forgranted to the point that users forget completely that it is the only contact the vehicle has

with the ground. By contrast with its competitors, however, (solid tires, rail, magneticlevitation, etc.), it is only the pneumatic tire which correctly performs all of the functionsrequired for ground mobility, on all surfaces and in all weathers.

A tire is a very complex product which, at the same time, must grip on various surfaces(e.g. snow, ice, sand, asphalt), carry a load, handle well, be comfortable, quiet, econo-mical…

Road networks, vehicle types, usage and the natures of drivers are very different throughout the world. A tire has to be adapted to these multiple conditions.

As year 2000 dawns this complex and composite product responds perfectly to currentvehicle requirements but to keep in step with their development, the tire must itself evolve constantly: improved safety, introduction of electronics into braking and stabilitysystems, new “clean” engines, reduction of noise and environmental protection.

Capital investments

Research and development

Retreading at Pneu LaurentAvallon, France

Transmission electron microscope



23

Michelin is a major player in this continuous development, working closely with worldmanufacturers to prepare the vehicles of tomorrow. This collaboration has given rise tosome very innovative products in recent years.

Research, development and leading-edge technology work is carried out at Ladoux, France, at Alméria, Spain, at Greenville, South Carolina, US and at Ohta, Japan. It is herein Michelin that work is done on the latest techniques – chemistry, measurement, analysis,modeling… - for the definition of tire designs and component materials in order toobtain the required aspects of performance, which themselves are often contradictory.

In the specification of a tire, aspects of performance must be balanced to match customer requirements exactly. It is necessary to follow the design steps relative to eachaspect of performance and also those which control the balance between them. To thisend, new methods are constantly being developed.

Tire performance relies in one aspect on the nature of the physico-chemical properties of thematerials used and considerable research has been made in this field, with very sophisticatedmethods of calculation and analysis.

A tire consists of different elements, assembled in a raw state and then cooked in a mold.Mixings – elastomers, reinforcing fillers, processing additives -, textile fabric and metallicfabric are necessary for its manufacture. Natural rubber, because of its physico-chemical properties (flexibility, strong mechanical resistance, good grip), remains a major constituentand agricultural research is striving improve its quality further. Synthetic rubbers and thenew elastomers are also studied constantly in order to improve their qualities. As anexample, with the introduction of the “green” tire in 1991 the incorporation of a par-ticular type of silica into rubber mixings was a major advance which enabled Michelin toestablish a leading position in this field, with a massive industrial application.

The processing additives (sulphur, plastifiers, anti-oxidants, anti-ozonants and anti-UV)are present in rubber mixings to make the tire resistant to thermomechanical constraints,the action of light and attack by ozone. An example of the work carried out on materials, the Artilheiro tire, the tread of which was in the colors of the Brazilian national flag, was marketed in Brazil during the 1988 Football World Cup.

Aspects of tire performance depend also on control of the interfaces between the variouselements, of which some are by nature very different. Research in the field of metallic andtextile reinforcements covers a wide area and aims to improve their mechanical andendurance properties. By virtue of progress made in the study of very high tensile steels,the tire has been strengthened and at the same time made lighter.

Tire architecture is equally the subject of constant research, the main aim being to improvetire life. This work must confirm, upgrade or increase the technical supremacy of products,without compromising industrial feasibility by a design that is too complicated or too expen-sive to produce. In the case of truck or earthmover tires for example, modeling techniqueshave led to significant improvements in the bead area, providing better resistance to oper-

Research and test centerLadoux, France

Artilheiro colored tire Brazil



24

ating demands. Tire architecture studies also seek to standardize, lighten and simplify so asto make production processes more efficient.

Exploring new tire architectures has led to a broader range of sizes and the development ofnew standards for tires, bringing major progress. An example is provided by the PAX systemwhich brings, at the same time, improved handling, driving comfort and reduced fuelconsumption but in addition, a potential for safety and mobility unobtainable until now, plusmore space for passengers, baggage or supplementary equipment.

New generations of truck tires are also being studied. These will make it possible, amongother things, to replace twin assemblies with wide single tires. This is expected to give savingsin fuel consumption, increased load capacity and increase space availability in the vehicle. Forpublic service vehicles, this application gives the prospect of increased passenger space andimproved accessibility.

Studies are also being done with a view to preparing a global approach to optimize the choice of materials, tire design and the manufacturing process in order to obtain the bestbalance between the aspects of tire performance, its production cost and the capital investment required to make it.

The continuous efforts made by Michelin in the matter of research and development give itan exceptional technological independence, for the tire itself and for the raw materials andsemi-finished products used in its manufacture. This freedom enables the Michelin Group toexplore the potential for development that the tire presents and to visualize new solutions togive users enhanced safety, comfort and handling while at the same time preserving the environment.

Passenger car and l ight t ruck t i res

In North America the extended mobility tire, Zero Pressure, was approved by vehicle manufacturers in 1996 and its adoption widened in 1998 in both the original equipment andreplacement markets. With the launch of the Pilot LTX Michelin was the first to introduce a

line of high performance 4X4 tires for powerful and fast sports vehicles. In addition, thenew Alpin Artic line provides excellent winter performance in a very wide range of sizes.

Under the BFGoodrich label the sport tire line G.Force T/A K.D., destined for the younger, enthusiastic and demanding customer, gives exceptional grip on dry surfaces. Inaddition, BFGoodrich was awarded a design prize by a specialist magazine for its coloredScorcher T/A tire.

The Uniroyal Tiger Paw Nail Guard gives excellent protection against external penetra-tions. A line of tires designed for wet conditions, the Tiger Paw Aquagrip, is the first offering of this type by Uniroyal and the tires provide particularly good grip in the wet,with an attractive price/performance.

In Europe under the Michelin label, the new Pilot Sport with directional tread patternoffers exceptional handling and grip for sports vehicles. The winter tire line Pilot Alpin is

New products

Michelin Pilot Alpin tire



25

designed for use on very high performance vehicles and provides optimum safety and gripfor winter motoring. In this line the first V-rated winter tire was unveiled at the Geneva MotorShow in March 1999. The Michelin 4x4 Alpin is again a winter tire, designed specially for longdistance use on off-road vehicles and is particularly good in wet, snowy or icy conditions. Asequipment for light utility vehicles, there has been a rapid acceptance of the Agilis line inboth original equipment and replacement.

Two tire lines have helped Kléber to strengthen its position as a winter tire supplier: the Kapnor, which offers a remarkable performance on ice, and the Krisalp which has been widely marketed since its launch in 1997.

In Asia, the T-rated MXE Green was introduced in Japan and a winter tire line for light trucks,the LT-Maxi Ice Van, is specifically designed for use on frozen or icy surfaces. The BFGoodrich offering has been expanded with the inclusion of American lines, notably theSport Truck T/A tire for pick-up trucks, introduced in Japan.

In South America, to mark the Bibendum centenary and the Football World Cup, Michelin marketed a limited series of Artilheiro tires, made in France using the C3M process, with the tread in the colors of the Brazilian national flag.

Truck t i res

A main innovative feature of 1998 was the introduction of a new range of tires for Metrotrains, designed with textile crown plies at 0° and providing maximum safety and comfort for passengers.

At the Paris and Geneva Motor Shows Michelin also presented the Extra Wide Single tire.The tire is capable of sustained speeds of 120 km/hr with a load capacity of almost sixtonnes and will replace twinned wheels on drive axles and trailers. Besides reducing fuelconsumption and increasing load capacity these tires give major space savings, providingnew possibilities in vehicle design.

The XJW4 line was launched in Japan and is destined to occupy a central position in theofferings, meeting the most varied of customer needs. The line is capable of unequalledgrip and tire life.

In Europe the line was expanded by the inclusion of the XDN tire, specially designed foruse on drive axles to improve mobility in winter driving conditions.

Also introduced was the trailer Energy tire, reinforcing Michelin’s position in the sector.The Stomil and Taurus lines were rounded out to include a full spread of dimensions,making them a very attractive proposition in West European markets.

In South America, Michelin strengthened its presence with the launch of a line of localdelivery tires which give a significant reduction in tire costs per mile.

Earthmover t i res

The first deliveries of 80 series tires for large dumpers, using Michelin low pressure technology, were made in 1998. The tires have been tested in varying conditions in mineson different continents and have shown that Michelin low pressure technology gives a

Michelin Extra Wide Single truck tire

Michelin X Quarry earthmover tire



26

marked improvement in performance with increased tire life and greater resistance todamage and penetrations.

Low pressure technology is also employed in the new range of giant tires, with rim diameter in excess of 57 inches. In linking the low pressure with a new reduced profile,Michelin has made it possible to design a new generation of giant vehicles with up to560 tonnes load capacity on 6 tires. These massive tires, which can be transported moreeasily because of their reduced overall size, were launched in 1998.

Complementing the improvements made to existing products, these two innovationshave reinforced Michelin’s leading technological position in the earthmover radial tiremarket and contributed to improved productivity and cost reduction in the mining indus-try. A further new development was introduced during the year: MEMS, the MichelinEarthmover Manager System. This is an electronic device which is incorporated in the tireduring manufacture and gives the operator a continuous indication of the inflation pres-

sure and temperature of each tire.

Agricu l tura l t i res

Michelin presented the MEGAXBIB in 1998, the widest agricultural radial tire on the market.This enormous tire, more than one meter wide, is designed mainly for harvesters and spread-ers and can carry a very high load. Capable of being used at very low pressure, the MEGAX-BIB has low compaction on all ground surfaces, thus improving agricultural yields.

Kléber launched a new line of Topker tires on the European market, for high powered trac-tors of 230CV and above. A new structure, with new rubber mixings and redesigned tread

bars, has considerably improved the traction of the Topker and for the user this results inbetter productivity and much less soil compression.

Two-wheel t i res

Michelin’s participation in bicycle competition has led to numerous technological innova-tions.

The Michelin Axial bicycle tire line, which uses treads based on silica technology, meetsthe requirements of the VTT market which has settled down in three segments: mixed,town and sport. There are four types of tire in the line: the Michelin Axial Pro for com-petition, the Michelin Axial Super Comp for training, the Michelin Axial Select Kevlar fortouring and the Michelin Axial Bi-Sport (two-colored) and Sport for leisure use.

In the motor cycle range the Michelin M45 tire is designed for an engine capacity of125cc and gives excellent wet roadholding and an extended tire life.

For scooters, the Michelin BOPPER tire gives exceptional grip due to its semi-slick treadpattern.

Michelin MEGAXBIB agricultural tire

Michelin Axial bicycle tire line



27

In our report to the 1998 Annual Meeting we explained the new agreements governing thelegal and financial relationships between the Company and, in the one part, ManufactureFrançaise, and in the other part, the other industrial companies within the Group. Theseagreements refer to research, development and industrialization, were implemented fromJanuary 1, 1998 and have thus been effective for the whole of the financial year.

The Company’s accounts showed net income for the financial year of FRF1,668,825,256(EUR254,410,770.22), an improvement of FRF407 million (EUR62.05 million) on the 1997figure of FRF1,261,809,017.17.

Trading income, the make-up of which has now changed, was up by FRF348.4 million.

Financial income, at FRF872.3 million, was up by FRF190.7 million, the improvement comingmainly from dividends received from subsidiaries.

These different factors explain the change in Ordinary income, FRF1.47 billion compared withFRF936.2 million in 1997.

There was exceptional income of FRF519.64 million. It arose mainly from the writing-back ofprovisions made for the depreciation of holdings in Manufacture Française and also in Spika,this as a result of the finalization of a restructuring operation which began in 1993 and wasdesigned to release Banque Industrielle et Mobilière from the majority of its real estate com-mitments

The charge for taxes on income was FRF326 million.

In the balance sheet the total increase of FRF272.4 million in capital stock and premiums inexcess of par value came from the exercise of options for stock dividends in respect of the1997 dividend.

Compagnie Générale des Établ issements Michel in



28

Compagnie Financière Michel inDuring the year 1998 Compagnie Financière Michelin continued to oversee the managementof its equity holdings in affiliated companies.

Total stockholdings increased by 478.6 million Swiss francs. New investment amounted toSFR497.6 million of which 179 million was in Asia and Oceania, 206 million in Europe, 109 million in South America and 3.6 million in Africa. Disposals in Asia amounted to 19 million.

Michel in in Europe

France

In our report to the 1998 Annual Meeting we explained the new agreements governingthe legal and financial relationships between Manufacture Française and, in the one part,Compagnie Générale and in the other part, the other industrial companies within theGroup. These agreements refer to research, development and industrialization, wereimplemented from January 1, 1998 and thus, have been effective for the whole of thefinancial year.

La Manufacture’s total net sales excluding taxes reached FRF25.1 billion, an increase of14.2% on the figure for 1997. Export sales, which accounted for 55.1% of total netsales, were up by 12.1% while domestic sales increased by 16.9%.

Sales to the original equipment market were up in all product categories and followedthe favorable trend in the automotive industry.

In replacement, sales of passenger car and light truck tires kept pace with the strong market growth, maintaining their global position despite some shortages of Michelinlabel top-of-the-range tires. 1998 was less favorable for sales of winter tires, followingtheir strong growth in 1997.

The replacement market for truck tires remained very buoyant in 1998 for both new andretreaded products, this because of the strength of the long-distance trucking business. Salesof new Michelin tires were not able to reflect this trend fully due to limitations of productioncapacity although truck tire retread sales showed strong growth.

In total, domestic market net sales of tires and wheels were up by 5% of which 13% was inoriginal equipment and 2.2% in replacement.

The increase in net sales was derived from an overall increase in sales volume, partially offsetby a fall in the average sales price.

Net income for the financial year, after accounting for exceptional expense, was FRF980 millioncompared with 746 million in 1997.

Operations and f inancial results of associated companies

Logistics. Distribution center Saint-Priest



29

Pneumatiques Kléber, a subsidiary of la Manufacture, posted net sales of FRF2.9 billionagainst 2.6 billion for 1997, an increase of 11%. Including exceptional income of FRF20.9 million, the company recorded net income.

United Kingdom

Passenger car sales trended favorably in 1998 and new registrations rose 3.5% to theirhighest level since 1989. Car production also set a new record, rising 3% relative to 1997.Registrations of utility vehicles increased by 6% for light truck and by about 25% in the truckand bus category although the domestic production of light trucks fell by 7% and of trucksweighing more than 3.5 tonnes, by 12%.

Michelin Tyre Public Limited Company’s total sales volume rose 14% in 1998, boosted byan increase of more than 20% in exports. Sales in the domestic market rose about 6%,both in the original equipment and replacement markets.

Production continued to accelerate during the year, at the end of which it exceeded the1997 level by 15%. Production costs were reduced, aided also by lower raw materialprices.

A significant investment was made at the Ballymena plant in Northern Ireland in order toincrease production capacity for mixings and finished products.

All in all the company’s sales revenues rose 6% relative to 1997. Due to the combinationof downward pressure on selling prices in the domestic market and the appreciation ofthe pound sterling in the first half of the year, however, the net result deteriorated andwas slightly negative in 1998.

Germany

German automotive production set a new record in 1998. Production of passenger carsand light trucks rose 14% and trucks by more than 19%. While recovery in the domesticmarket played a role, most of the growth was due to the very rapid acceleration of exports,up 16% for light vehicles and 20% for trucks.

Michelin’s sales in original equipment mirrored the vehicle output trend and rose sharply inthe light truck and truck tire categories. In the replacement market, the demand for sometire sizes could not always be satisfied because of production capacity constraints. In total,the net sales of Michelin Reifenwerke KgaA rose 6.9%.

Plant output rose by more than 13% to a new high in 1998.

Capital investment was up very sharply relative to the preceding year. Most of the funds wereused for additional equipment and upgrades at all plants as well as for equipping a newwarehouse.

Manufacturing costs continued to decline. The financial result was positive although it wasdown relative to 1997 due to provisions for early retirement, restructuring and also to anunfavorable trend in the sales mix.

Ballymena plant - Northern Ireland



30

Spain

The Spanish automotive industry trended favorably in 1998. Sales of light vehicles set a newrecord high, rising 17% thanks to government purchase incentives, following 11% in 1997.This growth in sales together with a 6% rise in exports led to a 10% increase in the outputof light vehicles. Similarly, truck production rose 24% while truck exports increased nearly20%.

Neumaticos Michelin, S.A.’s total sales revenue accelerated at a faster pace in 1998 than inthe previous year, fueled by both the domestic market and increased exports. Unlike thesituation in 1997, however, when the two markets expanded at the same rate, exports rosefaster than the domestic market.

Original equipment market tire demand was sustained and in line with the very favorabletrend in the automotive industry. Against this backdrop the company’s sales of passenger carand light truck tires grew faster than the market. The company was in general able to copewith the sharp increase in the demand for truck tires although some orders could not be metdue to limitations of production capacity.

The Spanish replacement market for passenger car tires grew faster than in the rest of Europe and Neumaticos Michelin, S.A.’s sales mirrored this growth, thanks to its multi-brandpolicy. A similar trend was observed in the truck tire replacement market, leading to anincrease in sales.

Sales revenue from exports rose 18.1% and accounted for 61.8% of net sales.

After accounting for expenses related to previous industrial restructuring plans and a taxation charge that was markedly increased compared with 1997, net income was muchhigher than in the previous year.

I ta ly

Having boosted the new registrations of passenger cars in 1997, the government’s vehiclepurchase incentive was phased out at the end of July 1998 and this triggered a sharp decline in sales in the second half of the year. Car sales for the year declined by 1.6% compared with 1997. By contrast, sales of sport/utility vehicles rose 19% and in total for thefull year, light vehicle production declined 9% while truck production rose 28%, bolstered bythe European market.

In these conditions, the volume of Societa per Azioni Michelin Italiana’s sales to the originalequipment market increased slightly.

The replacement market increased over the year as did the company’s sales. There was anincrease in passenger car tire sales under the Riken and BFGoodrich labels.

In all, the company’s net sales rose 7.2% thanks to the increase in sales volume in the domesticmarket and abroad.

Responding to increased tire demand, plant production was increased by 11%. The workforce was enlarged so as to extend plant operation to seven days a week, and the



31

additional training necessary to achieve this was provided. As a result, the amount of capitalinvestment in 1998 was higher than in the previous year. Further, the manufacture of metallic reinforcements was transferred from the Trente unit to the Fossano plant to improveproductivity and reduce production costs.

Due to a large increase in expense in priority areas such as logistics and management information systems, the net financial result for 1998, although positive, showed no improvement.

Belg ium And The Nether lands

New registrations of light vehicles in these two countries showed a good increase, of about14% although in Belgium, there was a further reduction in the assembly of passenger cars.In the Netherlands, vehicle output rose once more, for both passenger cars and trucks.

The tire markets reflected this positive trend and Michelin’s sales volume increased in the original equipment market, thanks mainly to the sale of fitted units. In the replacement market, sales of passenger car tires rose while those of truck tires were negatively impactedby a shortfall in production volume.

The sales revenues of Michelin Belux S.A. and Michelin Nederland N.V. increased and theyrecorded a net income.

Other West European Countr ies

In the Nordic countries, 1998 marked the first full year of operation for the new plant atGothenburg, Sweden which manufactures winter tires for Northern European markets. Twonew commercial companies were created, in Latvia and Lithuania. Rationalization of the distribution network continued and a depot was closed. Total sales volume for the Nordiccountries was down slightly relative to 1997 and sales revenues declined as a result.

In Greece, the market for passenger car and light truck tires contracted, unlike the automo-tive market, which was quite strong. Michelin’s sales benefited from a sharp growth in exportsales, notably to Bulgaria, and they increased overall despite a marked decline in volume salesto the domestic market.

In Portugal, the very competitive tire market grew by about 8% in favorable trading condi-tions. Michelin’s sales of passenger car tires were in line with the growth of the market thanksmainly to the Group’s multi-brand policy. Demand for the other brands was high and produced significant sales growth.

In Switzerland, Michelin’s sales in the markets for light vehicle tires, which had been expand-ing since 1997, declined slightly due to supply shortages in the top-of-the-range summer tiresegment and also, towards the end of the year, in certain winter tire sizes. New productswere launched: the Michelin Pilot Sport and Michelin Pilot Alpin lines for passenger cars andthe Agilis Snow Ice line for light trucks. The truck tire replacement market expanded in 1998although Michelin sales rose only slightly as demand exceeded supply for the popular tire



32

dimensions. Sales prices were under considerable downward pressure and this led to aslight decline in sales revenue relative to 1997.

In Austria, Michelin’s sales were up very sharply in the original equipment market, following an increase in automotive production, principally of passenger cars and trucks.In the replacement market, good results were obtained thanks mainly to multi-brandsales of passenger car tires. In total the company’s sales rose nearly 8% in 1998.

Centra l and east European countr ies

In Poland, trading conditions were buoyant in 1998. Production of passenger cars rosenearly 14%, while that of trucks and agricultural vehicles declined. Tire industry produc-tion rose overall.

Against this backdrop, Stomil-Olsztyn S.A.’s sales rose in 1998. Total production increasedmore than 10%, with passenger car tire output up 60%, following completion of thecapacity expansion program. The percentage of truck tires made with a metallic carcassrose sharply, accounting for nearly 13% of total production in 1998. In addition, a mold

production facility was built during the year.

Sales of passenger car tires to automotive manufacturers rose markedly. Exports as a percentage of total sales also rose very sharply in 1998 and consisted mainly of winter tiresfor passenger cars and truck radial tires.

Implementation continued of the capital expenditure program which commenced in 1996.Globally, net sales rose by about 18% and net income was more than double that for 1997.

In Hungary, the key event in 1998 was the expansion of production capacity at the Nyíregyháza plant, which specializes in the production of agricultural tires. The new capacity, to be used to make standard series agricultural tires under the Michelin and Kléber brands, came on stream during 1998. The new investment should double the tireoutput and also increase that of inner tubes.

The production and sales of farm tires rose in 1998, despite the collapse in sales to automotive manufacturers in eastern European countries.

At the Budapest site, where truck tires are made, production in 1998 rose more than10%. Most of these tires were destined for export.

Net sales posted by the Hungarian companies rose sharply. The consolidated net resultwas negative, however, due to the expense of bringing the new production capacity onstream, increased depreciation expense and the impact of the closure of the Taurus USsubsidiary.

Manufacture of Taurus agricultural tiresNyíregyháza - Hungary

1500

2000

2500

3000

1993 1994 1995 1996 1997 1998

ProductionSales

East European vehicleproduction and sales

(‘000 units - all vehicles)

(est.)



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Euromaster

The market share of Michelin’s European distribution network, Euromaster, increased in1998 under favorable trading conditions, especially in the first half.

Euromaster’s retail tire sales continued to grow steadily. Sales of accessories and servicesgrew even faster, confirming Euromaster’s objective to be a major player in the Europeanfast-fit repair business.

In a market which remained robust, Euromaster’s sales to passenger car fleets rebounded,following an average year. Sales to other operators, of truck fleets in particular, alsoincreased, buoyed by a healthy market in the first half. Supply shortages from manufac-turers were offset to some extent by the sale of retreaded tires.

Corporate clients’ requirements are shifting towards an increasingly sophisticated product/service mix, requiring still more resources, particularly in terms of informationsystems:

– the servicing of passenger cars fleets is becoming an important source of growth, makingit possible to capitalize on the size of the network and optimize its use while at the sametime upgrading the quality of the products and services generally offered to customers.

– for trucks, Euromaster intends to retain its leadership by using a mix of innovative servicesspecifically designed for truckers.

Euromaster’s wholesale activities increased significantly, thanks in part to the adoption of newcommercial programs for exclusive lines and value added services.

The reorganizing of sales teams by market is nearly complete and has accelerated the process of making sales outlets more specialized.

Following a study of synergies and economies of scale, Euromaster modified and then strengthened the central European organization responsible for providing cross-border support, mainly in the areas of purchasing and information systems .

Consolidated net sales rose 2.9 %, increasing significantly in Spain and Northern Europe.Euromaster’s operating margin continued to improve and its business remained profitabledespite difficulties encountered in Germany and Spain.

Michel in in Nor th Amer icaAutomotive production again trended favorably in North America in 1998. Light vehicle output exceeded 15 million units for the third successive year.

Growth was not as strong as in previous years. Light vehicle production stagnated due to thecombination of a 2% decline in passenger cars and a 1.4% rise in light trucks and sport/utilityvehicles. In the United States, the production of passenger cars fell more than 6% while thatof other light vehicles rose more than 4%, having already increased sharply in 1997.Following a rise of 16.5% in 1997, North American truck production again increased, bynearly 11%, buoyed by strong demand for very heavy trucks particularly in the United States.

Euromaster sales outlet



34

Sales of passenger car and light truck tires continued the favorable trend that began in 1996.Replacement market sales rose more than 3% although Michelin was unable to satisfy all thedemand, mainly because of a strike at the Fort Wayne plant. The Group’s major brands,however, maintained their market shares. Based on the seventh annual survey of US tirebuyers’ satisfaction, the Michelin, BFGoodrich and Uniroyal brands topped a hit parade of thesix premium brands. The Michelin brand was ranked the number one light truck tire for thefourth year in a row. The quality of Michelin’s relationships with independent dealers participating in the Alliance program was reinforced, leading to a gain in the share of themarket held by this distribution network.

The original equipment market was adversely affected in 1998 by a strike that lasted severalweeks at an automotive manufacturer. The Group’s sales in the fourth quarter, however, offset the shortfall in the first months of the year.

The truck tire market continued to grow rapidly in 1998, increasing by about 9%. Salesto truck manufacturers grew the fastest, rising by more than 18% compared with 1997.The replacement market increase was 5%. In these good trading conditions, sales by theMichelin companies resulted in a greater market share in the original equipment whereasmarket share gains were limited in the replacement market as production capacity wasutilized to the maximum. The increase in demand for truck tires in the North Americanmarket considerably exceeded the installed production capacity on the continent.

Tonnage produced rose 5% while production costs continued to decline.

The new earthmover tire production facility in Lexington, South Carolina was inaugu-rated in June 1998 and production started ahead of schedule. This facility can producetires of the very largest dimensions, required for the giant vehicles announced by USmanufacturers.

For North America as a whole, the Group’s net sales were stable 5%, costs were downand net income was less than in 1997.

Michel in in South Amer ica

Braz i l

1998 was a very difficult year for the Brazilian automotive industry. Sales in the domesticmarket fell sharply, which led to a 25% decline in light vehicle production. Truck production contracted only slightly because the drop in domestic demand was lower andthere was an increase in exports.

The truck tire replacement market was unchanged for the year, although it weakened inthe second half and the company’s sales volume trended similarly. The original equipmentmarket was adversely affected by the slowdown in the automotive sector where the company’s sales to truck manufacturers fell more sharply than the market average.

Lexington, South Carolina site - USA

Resende plant - Brazil



35

Demand for light vehicle tires again increased and the company’s sales volume rose sharply in very competitive trading conditions, thanks to extension of the distribution network. Market share gains were achieved in this segment.

Production of truck tires at the Michelin’s Campo Grande plant increased and capacitywas augmented.

In order to strengthen its position in South America, Michelin commenced constructionin 1998 of a new plant that will make tires for passenger cars and light trucks using C3Mtechnology. The plant is located in Resende in the State of Rio de Janeiro and the flexibilityof the process will allow a rapid response to changes in customer demand. Productionwill be continuous, seven days per week, and is scheduled to begin in the first quarter of1999.

Operating expenses rose sharply, mainly because of the new construction work and alsoto spending on publicity. All in all, and in difficult trading conditions, sales and the netfinancial result, expressed in US dollars, declined in comparison with 1997.

The financial results of the two plantations Plantações E. Michelin Ltda. in Mato Grossoand Plantações Michelin da Bahia Ltda. were negative. Further efforts to reduce costs andto improve yields and productivity yielded significant results, although these were notadequate to offset the decline in the price of natural rubber.

Other South Amer ican countr ies

Michelin acquired Icollantas, the largest tire manufacturer in Colombia and the exclusivedistributor of Michelin products in that country. Icollantas has plants at Bogota and Caliand markets its tires for passenger cars, light trucks, trucks, bicycles and agriculturalmachinery in all of the Andean Pact countries. The acquisition gives Michelin a strongindustrial and commercial base from which to expand in this region.

In Argentina, the key event in 1998 was the re-commencement of commercial activitiesand the creation of a sales company, operational since November.

Michel in in Asia

Japan

Unlike in 1997, when the downturn in the domestic market was offset by higher exports,vehicle production fell sharply in 1998. Vehicle sales to other Asian countries fell more than50% while sales in Japan fell further and as a consequence, production was down sharply.The output of light vehicles declined by 8% and that of trucks by nearly 40%. New registra-tions in the domestic market were down 12% for light vehicles and by more than 30% fortrucks.

Tire sales in the domestic market declined overall, with differing trends according to marketsegment. The original equipment market contracted more than replacement and sales of

1500

2000

2500

3000

3500

1993 1994 1995 1996 1997 1998

ProductionSales

South American vehicle production and sales(‘000 units - all vehicles)

Icollantas plant - Colombia

(est.)



36

passenger car tires held up better than those of truck tires. Exports rose sharply, benefiting once again from the weakness of the yen relative to the dollar, especially inthe first half.

Group sales volume rose markedly in the replacement market for passenger car and lighttruck tires but sales prices fell sharply due to the difficult trading conditions. Exportsremained stable. From January 1, 1998 Michelin Okamoto Tire Corporation merged thecommercial activities of its six distribution companies into a single unit. Sales of the grouped companies were virtually unchanged over the year. Production at the Ohta plantrose slightly and industrial costs were reduced although the negative financial result wasillustrative of the difficulty in trying to increase sales during a recession.

The volume of passenger car and light truck tires sold by the Group in the original equipment market rose as sharply in 1998 as it did in 1997, resulting in significant gainsin market shares.

Truck tire sales were relatively satisfactory given the particularly tough trading conditions.Both the original equipment and replacement markets for truck tires contracted markedlyover the year. Michelin sales volume doubled in the original equipment market, al-

though still at a modest level, and rose more than 10% in replacement, thanks mainly to the success of the new XJD4 tire. In total, sales revenues rose nearly 9% while volumes increased 14%, reflecting the pressure on sales prices in the declining market. The companyreported a loss as the improvement in the operating margin was insufficient to cover all ofits expenses.

Thai land

As in 1997, the automotive industry contracted sharply in 1998. Output declined by morethan 50%, with the decline reaching 70% for passenger cars, while sales in the domesticmarket plunged 60% compared with the previous year.

The tire markets mirrored these trends: in original equipment, there were large declinesin all tire categories; in replacement, sales of tires for passenger cars and light trucks roseslightly, while sales of truck tires declined, particularly for conventional tires.

In this very difficult economic context, sales of Michelin Siam Group Co., Ltd. were downoverall. Replacement market sales of radial light truck tires continued to grow strongly,however, while for original equipment truck tires, market share was increased.

As a result of the sharp growth in export sales, the share of which continued to increaseand accounted for nearly half of total sales in 1998, the sales revenue of the Thai companies increased relative to the preceding year.

Production of conventional tires slowed markedly, offset by a sharp increase in the output of radial tires, notably for light truck and truck. All in all, the tonnage producedwas slightly less than in 1997.

Production costs were higher owing to the impact of the currency depreciation on raw material purchases. The net financial result improved relative to 1997.

0

1000

2000

3000

4000

5000

6000

1993 1994 1995 1996 1997 1998

Asia excl. Japanof which :South KoreaThailand

Asian vehicle sales (excl. Japan)(‘000 units - all vehicles)

Metallic cable plantRayong - Thailand

(est.)



37

Phi l ipp ines

A feature of 1998 was the very strong increase in the production capacity for passenger carand light truck radial tires. At the same time, production of conventional tires fell sharply,accounting for just 69% of the tonnage produced compared with 87% in 1997. All in all,total output was up 11% on the previous year.

Despite a sharp decline in the original equipment market, due to a plunge of between 35%and 50% in the number of vehicles manufactured, sales volume rose sharply, buoyed byexports of passenger car, light truck and truck tires to other Group companies. The companystrengthened its positions in the replacement market in all tire categories and, in originalequipment, for passenger car tires.

In total, net sales rose sharply, but the higher cost of sales, notably from the impact of thedepreciation of the Philippine peso on raw material costs and also on finished goods, purchased in US dollars. This adversely affected the financial result which, while improved,remained negative.

South Korea

Owing to particularly difficult trading conditions and the effect of a local campaign to boycott foreign products, Michelin’s activity was mainly focused, in 1998, on cutting costs inorder to preserve the Group’s presence against the time when there will be a market recovery.

Following growth which lasted for a number of years automotive production slowed in 1997and declined further in 1998. Total production fell by more than 30% relative to a year earlier.

In the tire sector, the markets were down in all product categories. Against this backdrop,Michelin improved its positions in the original equipment market and maintained them in thereplacement market.

Taiwan

In 1998, the economic crisis in Southeast Asia had only a slight impact on Taiwan. TheGroup’s market shares continued to strengthen although the advances made were slowed bythe general economic background in Asia. Michelin’s retreading operation, TreadmasterTaiwan Ltd., continued to expand and is now obtaining raw materials from Thailand, thiscontributing to a sharp decline in costs.

China

Michelin conducts it business in China through four joint ventures: Michelin ShenYangTire Co., Ltd. (passenger car tires), Michelin ShenYang Rubber Components Co., Ltd.(semi-finished products), Michelin ShenYang Truck Tires Co., Ltd. (truck tires) and Michelin ShenYang Light Truck & Passenger Tire Co., Ltd. (light truck tires).

In the passenger car tires sector, Group sales continue to be adversely affected by a distribution network that is still new and requires further development. The restrictionsimposed on tire imports from the fourth quarter onwards will lead to growth in the salesof locally-made tires. A major effort to train sales teams began in 1998.

Laboratory for physico-chemicalmeasurement - ShenYang - China



38

In the truck tire sector, sales were limited by import restrictions. The setting up of a new salesforce began but was held back, however, by the lack of suitable recruits. Progress was madeon optimizing the start-up conditions for the tire plant in late 1998. The output expected in1999 should meet more than half of the Group’s sales needs in the country.

In these difficult trading conditions and in view of the large start-up costs of the various jointventures, their results were, as expected, negative in 1998.

Hong Kong

Despite the economic recession, Hong Kong continued to be an important base for Michelin’s business in certain Asian countries in 1998. Group sales in the area declined relative to 1997, especially in the fourth quarter, when import restrictions that had beenintroduced by China were strengthened.

The sales revenue of Michelin Asia (Hong Kong) Ltd. rose 4.2% in 1998 compared with theprevious year.

In Australia, in favorable trading conditions, Michelin strengthened its commercial presence,profiting from the robust market growth. Sales of earthmover tires rose sharply due to: thedevelopment of the distribution network, the success achieved in negotiating for largecontracts, and to an improved offering. The links established with passenger car and trucktire dealers in 1998 will provide a base on which to build a distribution network.

Michel in in the rest of the world

Niger ia

In 1998, sales in the tire sector continued to be difficult in an economic context which wasmarked by the relative stability of the naira and an increase in inflation, leading to a lossof competitiveness for locally-made products. In the replacement market, persistent shortages of petrol and diesel fuel led to a decline in volume sales of between 5% and8%, depending on the tire category, relative to the previous year. Market share in thelight vehicle tire category was down, with no change in truck. Moreover, the opening upof the market intensified the competition from imported products and this put strongdownward pressure on selling prices. Michelin continued to expand the distribution network for its tires, opening 55 Tyre Service Centers in 1998.

The decline in passenger car tire production was very pronounced but was limited in thetruck tire category, buoyed by strong growth in export sales.

Most of the capital investment was directed towards the installation of additional trucktire production equipment.

In total, sales revenue was down compared with the previous year. A reorganization program began 1998, a main feature of which was the transfer of administrative servicesfrom Lagos to Port Harcourt. These measures made it possible to control costs despiteinflation and to prevent a significant erosion of margins. All in all, the financial result

remained positive, although down sharply relative to 1997.

Rubber plantation - Nigeria



39

The program for the renewal of the four plantations continued both in the agriculturaldomain, via the replanting of the oldest surfaces, and in rubber processing with the upgrading of equipment. Production was up sharply, by 14%, relative to 1997. While salesvolume was 6% up on the previous year sales revenue declined in view of a fall in the average sales price, due in part to the plunge in the world prices of natural rubber. Productivity continued to improve.

Alger ia

Interrupted since late 1993, production at Société d’Application Techniques et Industriellescould not be resumed during the year because of the difficult situation existing in the country. Maintenance of the industrial facilities continued, together with a commercial presence, pending a possible re-start of the plant.

By virtue of the commercial operations of the company, imports of tires from other Michelincompanies increased.

Other Countr ies

In South Africa, Michelin signed an agreement with the Anglo American Corporation ofSouth Africa Limited, its exclusive importer since 1981. Pursuant to this agreement,Michelin set up a commercial agency to take over the importation of Group productsfrom July 1, 1998, and to enable Michelin to establish direct and more permanent relationships in the South African distribution market. The very high customs duties in thecountry are, however, putting a brake on rapid sales growth.

Michelin maintained its presence in the Middle East although sales volume was downrelative to 1997 due to the trading conditions in the region. They have been negativelyimpacted by the plunge in oil prices and there is very intense competition from cut-priceAsian products.

In Turkey, the sales generated by the commercial office continued to rise sharply in all tirecategories, strengthening Michelin’s presence in this market.

Commercial office - South Africa



40

The consolidated financial statements show net sales of FRF81.90 billion (EUR12.48 billion)compared with FRF79.69 billion (EUR12.15 billion) for 1997, up by 2.8%. At a constantscope of consolidation, sales volume was 3.5% higher than the previous year and thisaccounted for most of the increase in revenue.

Trading income was slightly down at FRF7.04 billion (EUR1.07 billion), against FRF7.17 billion(EUR1.09 billion) in 1997.

Net financial expenses were FRF1.44 billion (EUR219.90 million) compared with FRF1.50 bil-lion (EUR229 million) in 1997. This was an improvement compared with the previous yearwhich was affected by exchange losses following the devaluation of certain Asian currencies.

These different factors explain the change in Ordinary income, FRF5.60 billion (EUR853.36 mil-lion) compared with FRF5.67 billion (EUR864.70 million) in 1997.

Exceptional income was FRF303.4 million (EUR46.25 million) against FRF133.7 million(EUR20.38 million) in 1997. It arose mainly from capital gains realized on disposals of depotsand warehouses in Europe.

Taxes on income amounted to FRF2.02 billion (EUR307.60 million) compared with FRF1.57 billion (EUR239.28 million) for 1996.

Consolidated net income was FRF3.76 billion (EUR573.66 million) against FRF4.11 billion(EUR626.69 million) in 1997.

Gross cash flow was FRF8.18 billion (EUR1.247 billion) compared with FRF8.42 billion(EUR1.284 billion) in 1997.

Investments in tangible and intangible assets amounted to FRF7.15 billion (EUR1.09 billion)compared with FRF5.36 billion (EUR817 million) in 1997, a result of the expansion of Groupactivity in markets with high potential growth and also work carried out to adapt to changesin tire markets.

Consolidated stockholders’ equity at December 31, 1998 was FRF27.60 billion (EUR4.21 bil-lion) compared with FRF25.94 billion (EUR3.95 billion) at the end of the previous year. Outside of the distributions made in 1998 the change is due mainly to the 1998 net incomeand to an increase in negative translation adjustments, reducing reserves.

Borrowings and financial debt went up from FRF18.40 billion (EUR2.81 billion) at the end of1997 to FRF19.96 billion (EUR3.04 billion) at December 31, 1998. After deducting cash andequivalents plus stocks and securities, net financial debt moved from FRF11.15 billion(EUR1.70 billion) at the end of 1997 to FRF12.75 billion (EUR1.94 billion) at December 31,1998.

The total of net financial debt and quasi-capital in the form of subordinated debt wasFRF16.82 billion (EUR2.56 billion) at December 31, 1997 and at the end of 1998 it hadincreased by FRF1.23 billion (EUR188 million), to FRF18.05 billion (EUR2.75 billion). This wasdue mainly to the fact that the total of distributions made during the period, net capitalinvestments and increased working capital needs exceeded cash flow.

It is noted that the growing economic crisis in some countries has had no significant impacton the Group’s financial results. The fall in the Brazilian currency in January 1999 was takeninto account when converting the balance sheets of the subsidiaries in that country. In addition, the steps necessary for the advent of year 2000 have been taken within the framework of a worldwide strategy covering all spheres of activity.

Consolidated Financial Statements



41

Growth in tire markets should be sustained, with a marked contrast between geographiczones: firm in Europe and North America, the beginnings of a recovery in some Asian countriesand in recession in South America. Raw material costs should remain at a depressed level.

The sales objective for 1999 is to achieve volume growth of not less than 4%. This will comemainly from increased shares in the replacement market, which we were unable to servicesatisfactorily in 1998 because of product shortages.

Achieving this objective will be supported by extending the implementation of themulti-brand sales policy and increasing the sales force, particularly in markets targeted fordevelopment.

Michelin will also benefit from the augmentation and adaptation of production capacity carried out in 1997 and 1998.

The quality of our products and services in the various markets and a firm position on salesprices lead us to be confident about price trends in 1999.

Efforts to reduce costs and improve productivity are being strengthened. This will allow thecontinuation of strategic projects and at the same time respect the objective to stabilize operating expenses compared with those of 1998.

In summary, the objective this year is to achieve an appreciable improvement on the 1998financial results, continuing the trend recorded during the second half of 1998.

1999 outlook

Proposit ions

Before voting on the allocation of net income we ask you to approve the business operationsas shown in the financial statements put before you.

As we indicated at the beginning of this report, net income for the year wasFRF1,668,825,256 (EUR254,410,772.22).

After a transfer of EUR150,541.27 (FRF987,486) to the legal reserve, making it equal to one-tenth of capital stock, and deduction of EUR5,736,585.20 (FRF37,629,532.18), theshare attributable to the General Partners, the remainder of EUR248,523,643.75(FRF1,630,208,237.82) is supplemented by earnings of EUR20,245,427.65(FRF132,801,299.85) brought forward giving an amount of EUR268,769,071.40(FRF1,763,009,537.67) available for distribution.

Our report shows how the Company’s activities have evolved in a globalization of marketsand of competition. We are preparing to meet these challenges and our capital investments,the security for future success, remain substantial in all the aspects of the Company’s busi-ness. At the same time, we want you to have a greater share in this growth, thus we havecontinued to increase dividends.

In consequence we propose, from available funds of EUR268,769,071.40(FRF1,763,009,537.67), a total distribution of EUR103,562,431.16 (FRF679,325,016.58),including the corresponding tax credit.

The distribution will allow payment of a dividend of EUR0.66 (FRF4.33) per A capital shareand EUR0.64 (FRF4.20) per A jouissance and B share. Tax credits attached to the dividends



42

are EUR0.33 (FRF2.16) per A capital share and EUR0.32 (FRF2.10) per A jouissance and Bshare and to stockholders taking advantage of the tax credit this gives a total return ofEUR0.99 (FRF6.49) per A capital share and EUR0.96 (FRF6.30) per A jouissance and B share.

Note that the new tax rules for 1999 provide that, in some cases, the tax credit will equal45% - and not 50% - of the dividend payable.

Dividend entitlement arises June 15, 1999 from which date the shares will be quoted ex the1998 dividend.

It is also noted that the French interbank system operates exclusively in euros, and this couldlead to rounding twice on a double conversion (FRF/EUR – EUR/FRF) in conformity with theprovisions of clause 25 of law no. 98-546 of July 2, 1998.

The balance of the funds available for distribution, EUR165,206,640.24(FRF1,083,684,521.14) is to be allocated as follows:

– to the special reserve for long-term capital gains an amount of EUR112,179,543.93(FRF735,849,571).

– to ‘Other reserves’ EUR30,500,000, (FRF200,066,885) and the balance, EUR22,527,096.31(FRF147,768,065.14), to retained earnings carried forward.

Treasury stock does not have dividend rights and a sum corresponding to the dividend whichwould have been paid on the shares held at the above date will be transferred to the balanceof earnings carried forward.

Dividends paid and tax credits relating to the three preceding accounting periods are summarized below.

TOTAL REVENUE PER SHARE(in FRF)

A CAPITAL STOCK

DividendTax

creditTotal Dividend

Tax credit

Total

A JOUISSANCE AND B STOCKFian-cialyear

Distribution

1995 316 923 008.50 2.85 1.43 4.28 2.75 1.38 4.13

1996 396 469 486.50 3.40 1.70 5.10 3.30 1.65 4.95

1997 520 230 778.40 3.90 1.95 5.85 3.80 1.90 5.70



43

You will then be called upon to vote on the nomination of M. Eric Bourdais de Charbonnièreand M. François Grappotte as members of the Conseil de surveillance.

In addition, the mandate of Mme Annic Hauvette expires at the close of the Annual Meetingand she has requested, for personal reasons that we completely understand, that it is notrenewed. Her deep attachment to the Company has been apparent at meetings of theConseil de surveillance and we thank her warmly for her contribution and in particular, forher concern for the long-term interests of stockholders.

It was with great regret that we received news of the death of M. Michel Godret, a memberof the Conseil de surveillance for the past ten years. His common sense, the pertinence of hisquestions and his rigor have made an indispensable contribution and we extend our deepest sympathy to Mme Michel Godret and her family.

The authority that you gave last year for the Company to intervene on the stock exchangewith a view to the price regularization of its own shares was used in 1998 and 1,083,928 Bshares were purchased at an average price of FRF230.10. There were no sales.

Under the new regulations now in force in this matter we ask you to authorize, for a periodof eighteen months, a program to purchase Company shares, to a maximum limit of 10% ofcapital stock. The purpose of the program is the regularization of the share price, the deliveryof shares by way of exchange or for payment and in particular within the framework of financial operations such as development activities or upon the issue of securities givingaccess to capital, arbitrage with dividend payments and finally, by Special Meeting authorization, the possible cancellation of shares in order to optimize stockholders’ funds andearnings per share.

This stock could at any time be acquired, sold, exchanged or transferred, either on the stockexchange, by private agreement or otherwise, by all methods and chiefly by the transfer ofblocks, by options or by the use of derivatives.

We propose to retain the same price criteria as previously but as the shares are now pricedin euros, the ceiling and floor prices will be expressed in their euro equivalents: EUR76 for themaximum purchase price and EUR38 for the minimum sale price.

We invite you to adopt the resolutions put forward for your approval.

Clermont-Ferrand, France, March 12, 1999

François MICHELIN Edouard MICHELIN René ZINGRAFF

44


In accordance with the mandate given to us by your Annual Meeting of Stockholders, for thefinancial year ended December 31, 1998 we report below on:

- the results of our audit work on the annual accounts of Compagnie Générale des Établissements Michelin as set out in this report and,

- the specific verifications and information required by law.

Your Managing Partners are responsible for the preparation of the annual financial statements. It is our responsibility, based upon our audit, to express an opinion on these statements.

l. - OPINION ON THE ANNUAL ACCOUNTS

We have conducted our audit in accordance with accepted professional standards; thesestandards require us to apply such auditing procedures as provide reasonable assurance thatthe financial statements are free from material mis-statements. An audit includes examina-tion, on a test basis, of the relevant elements which support the information contained in thefinancial statements. It also includes an assessment of the accounting principles used, thesignificant estimates made in the preparation of the financial statements and in addition,their overall presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the annual accounts have been properly prepared in accordance with statutoryrequirements and present fairly, in all material respects, the financial result of the year’s operations, the financial situation and the assets and liabilities of your Company at the endof the financial year.

ll. - SPECIFIC VERIFICATIONS AND INFORMATION

Applying accepted professional standards, we have also carried out the specific verificationsrequired by law.

We have no comments to make on the accuracy of the information provided in your Managing Partners’ report and in the financial documentation sent to stockholders, or on theconformity of this information with the financial statements.




I n d e p e n d e n t A u d i t o r s ’ g e n e r a l r e p o r t


I n d e p e n d e n t A u d i t o r s ’g e n e r a l r e p o r t

o n t h e a n n u a l f i n a n c i a l s t a t e m e n t s

45


As the Statutory Auditors of your company, we are required to present to you a special reporton agreements regulated by law that have been made known to us. We are not required toinquire into the possible existence of such agreements.

We would inform you that we have not been advised of any agreement covered by the provisions of clause 258 of the law of July 24, 1966.




I n d e p e n d e n t A u d i t o r s ’ r e p o r t


I n d e p e n d e n t A u d i t o r s ’s p e c i a l r e p o r t

o n a g r e e m e n t s r e g u l a t e d b y l a w

46


Your Managing Partners’ report and the financial statements made available to you show theevolution of your Company’s business and its financial results for the year 1998. The generalreport of the Independent Auditors does not require any comment from us.

The consolidated accounts show net income of FRF3.76 billion (EUR573.66 million), theGroup’s share being FRF3.51 billion (EUR535.61 million), against FRF4.11 billion and 3.88 bil-lion respectively for 1997. The fall in net income, despite an increase in sales, did not reflectthe improvement in the trading margin, which reached 9% in the second half of the year.Further, net income was adversely affected by the large increase in taxation. You will note,however, the marked increase in capital investments, showing the dynamism of the enterprise, and the maintenance of a healthy financial structure.

Cash flow was FRF8.18 billion (EUR1.246 billion), down slightly because of exceptional elements.

In France, the net sales of Manufacture Française des Pneumatiques Michelin were up considerably at FRF25.1 billion. Net income, after exceptional expense, was 980 million.

Compagnie Financière Michelin continued to play a central role in Group financing andincreased its stockholdings by SFR497.6 million, with disposals of 19 million.

Within the context that we have outlined above your Managing Partners’ proposal for anincrease in the dividend distribution seems to us to be reasonable. This proposal demon-strates their confidence in the Company’s future and their policy of passing on the benefit ofthe improvement in the financial result to stockholders.

Our colleague, M. Michel Godret, died last year. We acknowledge his sure judgement andgood sense that always brought clarity to the Conseil’s work.

The mandate of Mme Annic Hauvette is due to expire and she has made it known to us that,for personal reasons, she does not wish it to be renewed. We thank her for her active par-ticipation in our meetings.

We propose to complete the composition of the Conseil de surveillance by the appointmentof two new members, Messrs Eric Bourdais de Charbonnière and François Grappotte.




47

If these proposals are adopted, the Conseil will be made up as follows:

NameYear Term of

elected office ends

M. Grégoire PUISEUX 1995 2000

M. Daniel MICHELIN 1995 2000

M. Pierre MICHELIN 1998 2003

M. Edouard de ROYÈRE 1998 2003

M. Eric BOURDAISde CHARBONNIÈRE 1999 2004

M. François GRAPPOTTE 1999 2004

You will also be asked to authorize a program for the purchase by the Company of its shareswithin the scope of the new regulations which now apply. The motivation and propositionsof your Managing Partners seem to us to be appropriate for the circumstances.

We invite you to adopt the resolutions submitted for your approval.

Clermont-Ferrand, France, April 12, 1999

Daniel MICHELIN



49

CO M PA G N I E GÉ N É R A L E D E S ÉTA B L I S S E M E N T S MI C H E L I N

1998 Portuguese Rally

Company financial statements 1998


50

Balance sheets at December 31in French francs

Fixed assets

Intangible fixed assets

Concessions, patents and similar rights 37 290 083.07 37 096 715.75 193 367.32 275 000.00

Other intangible fixed assets 402 076.80 275 770.59 126 306.21 134 726.62

Advances and payments on account — — — —

37 692 159.87 37 372 486.34 319 673.53 409 726.62

Tangible fixed assets

Land 672 152.69 — 672 152.69 672 152.69

Buildings 11 688 177.98 10 450 250.77 1 237 927.21 1 690 021.32

Other tangible fixed assets 3 032 168.61 2 403 059.96 629 108.65 814 033.40

Assets under construction — — — —


15 392 499.28 12 853 310.73 2 539 188.55 3 176 207.41

Financial fixed assets (1)

Stockholdings 17 124 725 223.58 2 844 112 770.25 14 280 612 453.33 13 885 855 640.14

Receivables related to stockholdings 8 796 018 097.85 — 8 796 018 097.85 8 850 776 162.59

Other investments 24 848 952.19 — 24 848 952.19 24 848 952.19

Loans 512 805.54 — 512 805.54 512 805.54

Other 4 470.00 — 4 470.00 4 470.00

25 946 109 549.16 2 844 112 770.25 23 101 996 778.91 22 761 998 030.46

(I) 25 999 194 208.31 2 894 338 567.32 23 104 855 640.99 22 765 583 964.49

Current assets

Accounts receivable 1 047 444 061.10 — 1 047 444 061.10 907 568 619.17

Stocks, shares and securities

Treasury stock 263 627 618.03 — 263 627 618.03 14 210 332.70

Other holdings 832 759.82 103.54 832 656.28 832 656.28

264 460 377.85 103.54 264 460 274.31 15 042 988.98

Cash and equivalents 520 792.98 — 520 792.98 396 418.29

Suspense accounts

Payments in advance (2) 30 950.31 — 30 950.31 224 893.55

(II) 1 312 456 182.24 103.54 1 312 456 078.70 923 232 919.99

Deferred charges (III) 13 863 417.88 — 13 863 417.88 15 806 738.88

Premiums on bond redemption (IV) — — — —

Foreign exchange conversion differences (V) — — — 3 227.66

GRAND TOTAL (I + II + III + IV + V) 27 325 513 808.43 2 894 338 670.86 24 431 175 137.57 23 704 626 851.02

(1) of which, falling due within one year 4 105 024 903.39 3 738 776 162.59

(2) of which, falling due after one year — —

1998 1997

Net NetDepreciation

andprovisions

Gross


51

Stockholders’ equity

Capital stock (of which FRF750 000 redeemed) 1 652 590 476.00 1 642 715 616.00

Paid in excess of par 11 407 387 222.30 11 144 880 527.30

Revaluation differences 3 488 320 291.43 3 495 573 510.64

Reserves

Legal reserve 164 271 561.60 144 157 086.00

Tax-regulated reserve 2 089 621 898.70 1 946 216 005.06

Other reserves 475 778 177.57 175 778 177.57

Retained earnings 132 801 299.85 4 341 892.93

Income for the year 1 668 825 256.00 1 261 809 017.17

Tax-related provisions 404 054 275.54 404 054 275.54

(I) 21 483 650 458.99 20 219 526 108.21

Provisions for contingencies and charges

Contingencies — 690 003 227.66

Future charges — —

(II) — 690 003 227.66

Creditors (1)

Convertible bonds 120 515.96 219 943.19

Other bonds 2 116 201 366.52 2 116 213 987.22

Amounts owed to financial institutions (2) — —

Other borrowings (2) 210 541 722.78 329 472 614.30

Taxes and social charges 213 079 630.02 16 525 065.88

Fixed assets and related accounts 133 950.00 133 950.00

Other accounts payable 407 447 493.30 332 531 954.56

(III) 2 947 524 678.58 2 795 097 515.15

Foreign exchange conversion differences (IV) — —

GRAND TOTAL (I + II + III + IV) 24 431 175 137.57 23 704 626 851.02

(1) of which, falling due after one year 2 000 000 000.00 2 000 000 000.00

(1) of which, falling due within one year 947 524 678.58 795 097 515.15

(2) of which, bank current facilities and overdraft balances — —

1998 1997

in French francs


52

Statements of income for the years ended December 31in French francs

Trading revenue (1)Royalties 1 787 837 753.34 554 973 103.46(of which, from outside France FRF1 417 903 115.49)Other revenue 317 895.35 364 961.13

(I) 1 788 155 648.69 555 338 064.59

Trading expenses (2)External charges 1 167 605 524.93 284 022 307.73Taxes and similar expense 4 270 972.89 2 814 489.94Wages and salaries 8 521 066.41 8 254 861.59Social charges 3 291 556.67 3 164 932.12Provision for depreciation● Fixed assets 1 113 083.32 1 914 160.80● Deferred trading expense — —Other expense 500 011.15 678 825.42

(II) 1 185 302 215.37 300 849 577.60

TRADING INCOME (l - ll) 602 853 433.32 254 488 486.99

Financial revenueFrom stockholdings (3) 998 879 743.77 808 212 583.95Interest and similar receipts (3) 1 264 822.69 1 204 834.49Provisions written back 3 227.66 3 139 864.16Foreign exchange gains 6 270 234.58 8 073 800.74Net gains on sales of securities — 11 663.16

(III) 1 006 418 028.70 820 642 746.50

Financial expensesDepreciation and provisions 1 943 321.00 1 946 548.66Interest and similar charges (4) 128 897 701.16 132 004 463.41Foreign exchange losses 3 244 937.68 5 028 487.71Net losses on sales of securities — —

(IV) 134 085 959.84 138 979 499.78

FINANCIAL INCOME (lll - lV) 872 332 068.86 681 663 246.72

ORDINARY INCOME BEFORE TAXATION (I - ll + lll - lV) 1 475 185 502.18 936 151 733.71

Exceptional revenueFrom ordinary activities 19 907.21 15 255 334.55From capital transactions 1 254 419.21 7 206.00Provisions written back 1 092 030 100.00 630 357 311.77

(V) 1 093 304 426.42 645 619 852.32

Exceptional expensesOn ordinary activities 572 316 309.47 108 026 841.56On capital transactions 1 351 416.13 8 875.74Depreciation and provisions — 38 723 958.56

(VI) 573 667 725.60 146 759 675.86

EXCEPTIONAL INCOME (V - Vl) 519 636 700.82 498 860 176.46

TAXES ON INCOME (Vll) 325 996 947.00 173 202 893.00

TOTAL REVENUE (l + lll + V) 3 887 878 103.81 2 021 600 663.41

TOTAL EXPENSE (ll + lV + Vl + Vll) 2 219 052 847.81 759 791 646.24

NET INCOME 1 668 825 256.00 1 261 809 017.17

(1) of which, revenue relating to previous years — —

(2) of which, expenses relating to previous years — 6 763.44

(3) of which, revenue in respect of subsidiaries 997 519 734.48 807 312 053.15

(4) of which, expenses in respect of subsidiaries 10 980 453.00 9 834 331.00

1998 1997


53

Appendix to the financial statementsin French francs

The balance sheet totals before appropriations for the year endedDecember 31, 1998 were FRF24 431 175 137.57.

The statement of income for the year, presented in tabular form,shows:

— Total revenue 3 887 878 103.81

— Total expense 2 219 052 847.81

Net income for the financial year 1 668 825 256.00

The accounting period consisted of twelve months and coincided withthe calendar year.

These notes and tables form an integral part of the accounts.

THE YEAR’S ACTIVITIES Main features of the year’s activities are covered in the ManagingPartners’ report to the Annual Meeting of Stockholders, convened toconsider the 1998 accounts.

ACCOUNTING METHODS AND PRINCIPLESThe methods of valuation and determination of the financial resulthave been applied on a basis consistent with previous years.

The accounts for the year to December 31, 1998 have been preparedand presented in conformity with the accounting rules and with dueregard to the principles of prudence, separation of accounting yearsand continuity of trading.

Specific valuation methods used in the preparation of the accountswere as follows:

a) Intangible fixed assets

The “Concessions, patents and similar rights” consist mainly ofpurchases of computer software; these items are written offaccording to their relative importance, either within 12 months orover a 3-year period.

“Other intangible fixed assets” are vehicle parking rights, writtenoff over a 40-year period in accordance with the fiscal rule.

b) Tangible fixed assets

● Gross values

Tangible fixed assets are valued at historic cost, increased whereapplicable by the legal revaluation undertaken in 1976/1978.

● Depreciation

Is calculated on a straight-line basis and the asset lives used are:

- Buildings 30 years,

- Other tangible fixed assets 10 years, with the exception ofcomputer equipment where a life of 5 years is used.

c) Financial fixed assets

Stockholdings

● Gross values: stockholdings are valued at historic cost,increased where applicable by the revaluation undertaken in1976/1978.

● Net values: generally, the net values appearing in the balancesheet are not greater than those which would be used as theresult of a consolidation by the equity method, with thefollowing exceptions:

- for Manufacture Française des Pneumatiques Michelin, dueto the existence of potential capital gains on various tangibleassets and also to the fact that there are intangible assets notrecorded in the balance sheet.

Note, however, that the provision for depreciation previouslymade against the value of this stockholding has again beenpartly written back this year, as a consequence of thecompany’s positive financial result.

- for Pardevi S.A., the valuation of which, in accordance withaccounting and fiscal rules, takes into account the potentialgains on its portfolio.

Other financial investments

Holdings that the Company intends to retain but which are notdirectly related to its business activity are grouped under thisheading.

They are valued consistent with stockholdings.

d) Accounts receivable

Appear at nominal value.

e) Paid in excess of par

This heading relates mainly to premiums on issues of stock and onthe conversion of bonds into shares.

f) Tax-regulated reserves

Consist almost entirely of capital gains reinvested in the writing-down of financial securities in accordance with the old article 40of the Code Général des Impôts. The amounts were classed as“Regulated depreciation” prior to the legal revaluation undertakenin 1976/1978.

g) Foreign exchange operations

The revenues from and expenditures on currency dealings arerecorded at their exchange values at the date of the transaction.

Amounts receivable and payable in currency are shown in thebalance sheet, converted to French francs at the December 31exchange rate. The resulting differences are shown in the balancesheet as “foreign exchange conversion differences”, either as anasset or liability. Potential currency losses are provided forseparately as contingencies.

Forward exchange operations outstanding at the end of the yearare shown in the balance sheet. Any potential net losses likely toresult from them are provisioned, as necessary, under“Contingencies”.

h) Deferred charges

Relate to the balance of issue expenses of the 1996 bonds, writtenoff over the term of the borrowing.


54

FIXED ASSETS AND DEPRECIATIONIntangible and tangible fixed assets which are not material, together with those which are almost entirely written off, are not included in thetable below.

FIXED ASSETSGross value

atJanuary 1

Acquisitions,New loans,Increases in

holdings

Sales,Taken out of service,Repayment of loans,Decreases in holdings

Gross valueat

December 31

Intangible fixed assets 37 294 849 397 311 — 37 692 160Tangible fixed assets 16 709 659 66 829 1 383 989 15 392 499

54 004 508 464 140 1 383 989 53 084 659

Financial fixed assets:Stockholdings 17 125 998 510 — 1 273 287 17 124 725 223Receivables related to stockholdings 8 850 776 163 451 106 734 505 864 799 8 796 018 098Other financial investments 24 848 952 — — 24 848 952Loans 512 806 — — 512 806Other financial assets 4 470 — — 4 470

26 002 140 901 451 106 734 507 138 086 25 946 109 549

TOTAL 26 056 145 409 451 570 874 508 522 075 25 999 194 208

DEPRECIATIONBalance

atJanuary 1

Increases:provisions

during the year

Decreases:Depreciation

related to disposals

Balanceat

December 31

Intangible fixed assets 36 885 122 487 364 — 37 372 486Tangible fixed assets 13 533 451 625 719 1 305 859 12 853 311

50 418 573 1 113 083 1 305 859 50 225 797

Deferred charges 100 436 366 1 943 321 96 809 896 5 569 791

TOTAL 150 854 939 3 056 404 98 115 755 55 795 588

PROVISIONSBalance

at January 1Increases: Provisions

during the yearDecreases: Written back

during the yearBalance

at December 31

Tax-related provisions 404 054 276 — — 404 054 276Provisions for contingencies and charges:Contingencies (1) 690 003 228 — 690 003 228 —Deferred charges — — — —

690 003 228 — 690 003 228 —

Amortization (2) 3 240 142 974 6 000 000 402 030 100 2 844 112 874

TOTAL 4 334 200 478 6 000 000 1 092 033 328 3 248 167 150

of which, provisions and written back:- operating — —- financial — 3 228- exceptional — 1 092 030 100- transfer to revaluation reserve 6 000 000

(1) The write-back of FRF690 000 000 in the provision for contingencies relates to steps taken by the SPIKA affiliate to cover its participation in therestructuring of Banque Industrielle et Mobilière Privée, designed to release the bank from the majority of its real estate commitments. The restructuring, which commenced in 1993, was finalized in 1998.

(2) Movements in the provision for amortization concerned the following:- Provisioned: Various holdings 6 000 000

Accounts receivable —- Written back: MFPM stockholding 300 000 000

SPIKA stockholding 102 030 100

in French francs


55

DETAILS OF CERTAIN BALANCE SHEET ITEMS

MATURITY OF AMOUNTS DUE AND PAYABLE

Related to companies

Subsidiaries Investments

Payables or receivablesin the form of

Bills of exchange

Stockholdings (net value) 14 280 612 449 4 —Receivables related to stockholdings 8 796 018 098 — —Other financial fixed asset investments — 24 848 952 —Other amounts receivable 894 874 152 — —Other borrowings 210 541 723 — —Other amounts payable 396 377 599 — —

DUE Gross due within one year due after one year

PAYABLE Gross due within one year due after oneand within five years due after five years

Fixed assetsReceivables related to stockholdings 8 796 018 098 4 105 018 098 4 691 000 000Loans 512 806 6 806 506 000Other financial fixed assets 4 470 — 4 470

Current assetsAccounts receivable 1 047 444 061 945 151 879 102 292 182

TOTAL 9 843 979 435 5 050 176 783 4 793 802 652

Convertible bonds 120 516 120 516 — —Other bonds 2 116 201 367 116 201 367 — 2 000 000 000 (1)Amounts owed to financial institutions — — — —Other borrowings 210 541 723 210 541 723 — —Taxes and social charges 213 079 630 213 079 630 — —Fixed assets and related accountss 133 950 133 950 — —Other amounts payable 407 447 493 407 447 493 — —

TOTAL 2 947 524 679 947 524 679 — 2 000 000 000 (1)

(1) 1996 borrowing at 6.7% repayable in full at par, February 19, 2006.

Balance sheet item

Convertible bonds —Other bonds 116 132 000Amounts owed to financial institutions —Other borrowings 1 861 173Taxes and social charges 1 720 037Other accounts payable 7 469 949

TOTAL 127 183 159

ACCRUED INTEREST AND INVOICES PENDING

in French francs

(included in creditors)


56

SUSPENSE ACCOUNTS PAYMENTSAND REVENUES IN ADVANCEPayments in advance were in respect of trading expenses,in the sum of 30 950

REVALUATIONRevaluation differences were 3 488 320 291of which: - 210 500 related to land,

- 3 488 109 791 related to stockholdings.

CAPITAL STOCK Number Nominalvalue

1. Shares issued at January 1 136 892 968 12

2. Shares issued during the year (1) 822 905 12

3. Shares redeemed during the year — —

4. Shares issued at December 31 137 715 873 12

(1) 822,905 shares were issued in 1998 as stock dividends and:- the consequent increase in capital stock was

12 x 822,905 = 9 874 860- the amount paid in excess of par value increased by

(331-12) x 822,905 = 262,506,695

TRADING REVENUEThe change in the figure for trading revenue is the result of the alterationmade at the end of 1997. The role of the Centre de Technologie, whichinitiates and fosters long-term technological development, wasdistinguished from that of the Product Lines, which have a worldwide briefto manage the development and industrialization required to respondrapidly to changes in demand in tire markets and for which, the ProductLines provide manufacturing and marketing facilities. This distinction hasled to an increase in external charges, now recorded as research expenseincurred by the Company, and has had a significant effect on the tradingresult.Trading revenue of 1 787 837 753 consisted wholly of royalties.It was made up as follows:- France 369 934 638- Outside of France 1 417 903 115

1 787 837 753

TAXES ON INCOMEThe charge for corporate taxes was 325 996 947 in 1998.

MARKET EXPOSURE

a) Interest rate riskFollowing the issue of bonds to the value of FRF2 billion in February1996, the Company entered into an interest rate swap agreement for500 million. Outside of this, the borrowing is financed at three-monthmarket rates.There are no commitments to other interest rate instruments.

b) Foreign exchange riskAt December 31, 1998 the Company had receivables to a total netvalue of 520.8 million in respect of accrued royalties, due within sixmonths. The amounts will be received either in one of the majorEuropean currencies or in US dollars and are included in the balancesheet at their French franc exchange value as at the end of the year.

Provision has been made as necessary to cover potential exchange risk.It is in any case partially covered by forward sales and for these, theminor differences between the amounts of currency payable andreceivable are included, where appropriate, in ascertaining the balancesheet provision for foreign exchange conversion differences.

c) Risk on stock heldThe Company holds:- stock, both in associated companies and as long-term investments.

The valuation of these reflects their utility to the Company and alsotheir potential worth on realization;

- stocks, shares and securities to an overall net value of 264 million.Their quoted price amounted to 272.4 million.

MANAGEMENT COMPENSATIONThe Company is administered by Gérants (Managing Partners) who arealso Associés commandités (General Partners). In this latter capacity theybenefit from a global allocation of income as prescribed by the Articles andshared between all of the General Partners. The Managing Partners do nototherwise receive salary or benefits in kind from the Company or fromcompanies which it controls.

Management 8 —Supervisory/Technical — —Staff 25 —Hourly paid — 1

33 1

POSTRETIREMENT INDEMNITY LIABILITIESThe Company’s obligations under this heading are detailed in theConvention Collective. The total actuarial valuation of the liability as atDecember 31, 1998 was approximately 4.1 million. It was not provided forin the accounts..

INCREASES / DECREASESIN THE FUTURE TAX CHARGE

Type of temporary difference Amount

Increases:Tax-regulated provisions —

TOTAL —

Increases in the future taxation charge —Decreases:Provisions not deductible in the year in which they were made:- Contingencies and charges —- Amortization —Other 2 324 264

TOTAL 2 324 264

Decreases in the future taxation chargeCorporate tax at 19% 441 610

+cont. 10% +cont.15% 110 403

Depreciation classed as deferred —Losses carried forward —Long-term amortization of investments —

Permanentemployees

AVERAGE NUMBEROF EMPLOYEES

Temporarystaff

in French francs


57

INVESTMENT PORTFOLIO AT DECEMBER 31, 1998

Holding Inventory value

Stockholdings and other fixed asset securities, portfolio value more than FRF1 000 000:

Compagnie Financière Michelin 12 252 920 shares 9 853 134 942.90

Manufacture Française des Pneumatiques Michelin 3 199 580 — 3 187 520 793.24

Participation et Développement Industriels S.A. “Pardevi” 1 199 986 — 946 988 164.71

Société de Technologie Michelin 99 994 — 99 994 000.00

Spika S.A. 199 986 — 169 988 100.00

Société de Participations dans les Entreprises Régionales en Expansion “Siparex” 121 987 — 12 528 081.14

Siparex Associés 115 152 — 10 120 839.05

Société Financière d’Innovation du Sud-Est “Sudinnova” 21 786 — 2 200 032.00

Société d’Exportation Michelin 19 980 parts 21 411 363.17

Société Antillaise des Pneumatiques Michelin 500 — 1 575 084.31

Other stockholdings (Total) 5.00

Stocks, shares and securities:

Treasury stock 1 196 527 shares 263 627 618.03

Securities 4 200.08

Shares, New York stock exchange 34 607 — 828 456.20

in French francs


58

LIST OF AFFILIATES AND STOCKHOLDINGS

Capitalstock

(1)

Otherstockholders’

equitybeforeIncome(Loss)

(1)

%Holding

Value of holdingin accounts

Loans andAdvancesmade by

theCompanynot yetrepaid

Guaranteesand

Endorse-ments

given bythe

Company

Net salesin last

accountingperiod

Income(Loss)in last

accountingperiod

Dividends receivedby the

Companyduring

the yearGross Net

A - Details of affiliates and stockholdings(portfolio value exceeding 1% of the capital stock of the Company)

1 - Subsidiaries (holding of more than 50%)

Société d’Exportation MichelinPlace des Carmes-Déchaux, 63000 Clermont-Ferrand, France

1 000 000 13 409 242 99.90 27 411 363 21 411 363 — — 56 763 707 6 724 795 —

Participation et Développement Industriels S.A. “Pardevi”23, rue Breschet, 63000 Clermont-Ferrand, France

120 000 000 214 673 703 99.99 1 047 746 037 946 988 165 — — — 10 686 640 35 999 580

Compagnie Financière Michelin12, route Louis-Braille, 1763 Granges-Paccot, Switzerland1 404 831 200 2 443 066 373 91.67 9 853 134 943 9 853 134 943 — — — 1 185 871 302 492 954 386Swiss francs Swiss francs

Société de Technologie Michelin23, rue Breschet, 63000 Clermont-Ferrand, France

100 000 000 — 99.99 99 994 000 99 994 000 — — — 10 924 212 —

Spika S.A.23, rue Breschet, 63000 Clermont-Ferrand, France

20 000 000 50 739 215 99.99 169 988 100 169 988 100 301 485 084 — — 117 496 687 —

2 - Stockholdings (holding between 10 and 50%)

Manufacture Française des Pneumatiques MichelinPlace des Carmes-Déchaux, 63000 Clermont-Ferrand, France2 000 000 000 2 493 495 926 39.99 5 920 235 903 3 187 520 793 3 191 771 999 — 25 122 539 614 980 436 550 —

B - General information regarding other affiliates and stockholdings

1 - Affiliates not included in A:

- In France — — (2) 61 344 474

- Outside France 4 038 474 3 — — —

2 - Stockholdings not included in A:

- In France 1 577 924 1 575 085 — — 182 000

- Outside France 598 479 1 — — —

(1) In local currency(2) Company wound up in 1998

in French francs


59

CHANGES IN STOCKHOLDERS’ EQUITY (Balance sheet before distributions, non-consolidated)

1997 1998

Result for the year (in FRF thousands and FRF per share)

Statement of Income

Income 1 261 809.00 1 668 825.00

per share 9.22 12.12

Proposed Dividend

Total 520 231.00 578 455.00

per A capital share 3.90 4.33

per A jouissance and B share 3.80 4.20

Detailed changes in stockholders’ equity (in FRF thousands) 1998

A) 1 - Stockholders’ equity at end of 1997 financial year 20 219 526

2 - Distributions voted by the Annual Meeting of Stockholders 670 259

3 - Balance brought forward in 1998 financial year 19 549 267

B) Retrospective adjustments to the balance brought forward in 1998:

1 - to Capital stock and paid in excess of par —

2 - to Reserves —

C) Stockholders’ equity brought forward after retrospective adjustments (A3 + B) 19 549 267

D) Changes during the year:

1 - Capital stock 9 875

2 - Paid in excess of par 262 507

3 - Revaluation differences (7 253)

4 - Reserves —

5 - Tax-related provisions —

6 - Adjustment of retained earnings brought forward 430

7 - 1998 Net income 1 668 825

E) Stockholders’ equity, before Annual Meeting, (C + D) 21 483 651

F) Total change in stockholders’ equity during the year (E – C) 1 934 384

G) of which: variation due to change in capital stock and premiums 272 382

H) Change in stockholders’ equity during the year excluding changes in the capital stock and premiums (F - G) 1 662 002

in French francs


60

D1: – 1997 stock dividends = 822 905 shares822 905 x 12 = 9 874 860 9 875

D2: – Paid in excess of par on the shares issued as stock dividends 262 507

D3 : – Revaluation reserve written back (7 253)

D6: – Dividend attributable to treasury stock 430

Sources

Balance of retained earnings brought forward 132 801 299.85

Net Income for the financial year 1 668 825 256.00

Appropriations

Legal reserve 987 486.00

Tax-regulated reserves for long-term capital gains 735 849 571.00

Dividends:

A capital shares 49 196.77A jouissance and B shares 578 148 421.76

Share attributable to the General Partners, as provided by the Articles 37 629 532.18

Taxes on distributions 101 127 398.00

Other reserves 200 066 885.00

Balance of retained earnings carried forward 147 768 065.14

TOTAL 1 801 626 555.85 1 801 626 555.85

APPROPRIATIONS OF INCOME FOR THE YEAR 1998

(in French francs converted from euros)

Notes :

in French francs(in FRF thousands)


61

19981997199619951994

I - Capital at December 31

a) Capital stock 1 298 064 972.00 1 382 773 128.00 1 441 570 860.00) 1 642 715 616.00 1 652 590 476

b) Issued common shares 108 172 081.00 115 231 094.00 120 130 905.00) 136 892 968.00 137 715 873

c) Issued non-voting shares with priority dividend — — — — —

d) Maximum future issues of shares:arising from convertible bonds 20 109 544.00 20 299 043.00 16 080 530.00) — —arising from warrants 10 092 457.00 — — — —arising from loyalty bonus 5 734 506.00 — — — —

II - Annual results

a) Trading revenue, excluding taxes 440 610 550.73 464 719 492.33 521 949 978.91) 554 973 103.46 1 787 837 753.34

b) Income before taxation and netdepreciation and provisions 334 173 847.95 383 628 461.07 1 133 109 314.83) 844 099 402.26 905 845 279.66

c) Taxes on income — 67 521 060.00 (13 087 414.00) 173 202 893.00 325 996 947.00

d) Employees’ share of income for the year — — — — —

e) Net income after taxation, depreciation and provisions 248 264 366.85 367 959 402.20 794 509 825.43) 1 261 809 017.17 1 668 825 256.00

III - Results per share

a) Income after taxation but before depreciation and provisions 3.09 3.33 9.54) 4.90 4.21

b) Net income after taxation,depreciation and provisions 2.30 3.19 6.61) 9.22 12.12

c) Dividend:– A capital share 2.35 2.85 3.40) 3.90 4.33– A jouissance and B share 2.25 2.75 3.30) 3.80 4.20

IV - Personnel

a) Average number of employees during the year 35.00 33.00 34.00) 32.00 33.00

b) Total salaries & wages paid during the year 8 690 334.73 7 887 296.08 10 505 732.25) 8 254 861.59 8 521 066.41

c) Cost of social security and employee facilities 3 414 792.19 3 108 724.57 3 518 746.92) 3 164 932.12 3 291 556.67

SUMMARY OF RESULTS FOR THE YEARS 1994 TO 1998 in French francs


62


63

Company financial statements 1998

in euros


64

Balance sheets at December 31in euros

Fixed assets


Concessions, patents and similar rights 5 684 836.52 5 655 357.86 29 478.66 41 923.48

Other intangible fixed assets 61 296.21 42 040.96 19 255.25 20 538.94


5 746 132.73 5 697 398.82 48 733.91 62 462.42


Land 102 469.02 — 102 469.02 102 469.02

Buildings 1 781 851.25 1 593 130.46 188 720.79 257 642.09

Other tangible fixed assets 462 251.12 366 344.13 95 906.99 124 098.59

Assets under construction — — — —


2 346 571.39 1 959 474.59 387 096.80 484 209.70

Financial fixed assets (1)

Stockholdings 2 610 647 530.80 433 582 196.74 2 177 065 334.06 2 116 885 045.84

Receivables related to stockholdings 1 340 944 314.62 — 1 340 944 314.62 1 349 292 127.78

Other investments 3 788 198.34 — 3 788 198.34 3 788 198.34

Loans 78 176.70 — 78 176.70 78 176.70

Other 681.45 — 681.45 681.45

3 955 458 901.91 433 582 196.74 3 521 876 705.17 3 470 044 230.11

(I) 3 963 551 606.03 441 239 070.15 3 522 312 535.88 3 470 590 902.23

Current assets

Accounts receivable 159 681 817.73 — 159 681 817.73 138 357 944.07

Stocks, shares and securities

Treasury stock 40 189 771.29 — 40 189 771.29 2 166 351.25

Other holdings 126 953.42 15.79 126 937.63 126 937.63

40 316 724.71 15.79 40 316 708.92 2 293 288.88

Cash and equivalents 79 394.38 — 79 394.38 60 433.58

Suspense accounts

Payments in advance (2) 4 718.35 — 4 718.35 34 284.80

(II) 200 082 655.17 15.79 200 082 639.38 140 745 951.33

Deferred charges (III) 2 113 464.43 — 2 113 464.43 2 409 721.81

Premiums on bond redemption (IV) — — — —

Foreign exchange conversion differences (V) — — — 492.05

GRAND TOTAL (I + II + III + IV + V) 4 165 747 725.63 441 239 085.94 3 724 508 639.69 3 613 747 067.42


(2) of which, falling due after one year — —

1998 1997

Net NetDepreciation

andprovisions

Gross


65

Stockholders’ equity

Capital stock (of which 114 336.76 redeemed) 251 935 793.96 250 430 381.26

Paid in excess of par 1 739 044 971.29 1 699 026 083.62

Revaluation differences 531 791 000.24 532 896 746.38

Reserves

Legal reserve 25 043 038.13 21 976 606.09

Tax-regulated reserve 318 560 804.85 296 698 717.30

Other reserves 72 531 915.59 26 797 210.42

Retained earnings 20 245 427.65 661 917.31

Income for the year 254 410 770.22 192 361 544.60

Tax-related provisions 61 597 677.22 61 597 677.22

(I) 3 275 161 399.15 3 082 446 884.20

Provisions for contingencies and charges

Contingencies — 105 190 313.95

Future charges — —

(II) — 105 190 313.95

Creditors (1)

Convertible bonds 18 372.54 33 530.12

Other bonds 322 612 818.60 322 614 742.62

Amounts owed to financial institutions (2) — —

Other borrowings (2) 32 096 878.73 50 227 776.26

Taxes and social charges 32 483 780.19 2 519 230.05

Fixed assets and related accounts 20 420.55 20 420.55

Other accounts payable 62 114 969.93 50 694 169.67

(III) 449 347 240.54 426 109 869.27

Foreign exchange conversion differences (IV) — —

GRAND TOTAL (I + II + III + IV) 3 724 508 639.69 3 613 747 067.42

(1) of which, falling due after one year 304 898 034.47 304 898 034.47


(2) of which, bank current facilities and overdraft balances — —

1998 1997

in euros


66

Statements of income for the years ended December 31in euros

Trading revenue (1)Royalties 272 554 108.48 84 605 104.22(of which, from outside France EUR216 157 936.49)Other revenue 48 462.84 55 637.96

(I) 272 602 571.32 84 660 742.18

Trading expenses (2)External charges 178 000 314.80 43 298 921.69Taxes and similar expense 651 105.62 429 066.23Wages and salaries 1 299 028.20 1 258 445.54Social charges 501 794.58 482 490.79Provision for depreciation● Fixed assets 169 688.46 291 811.93● Deferred trading expense — —Other expense 76 226.21 103 486.27

(II) 180 698 157.87 45 864 222.45

TRADING INCOME (l - ll) 91 904 413.45 38 796 519.73

Financial revenueFrom stockholdings (3) 152 278 235.28 123 211 214.14Interest and similar receipts (3) 192 820.98 183 675.83Provisions written back 492.05 478 669.21Foreign exchange gains 955 891.10 1 230 842.99Net gains on sales of securities — 1 778.04

(III) 153 427 439.41 125 106 180.21

Financial expensesDepreciation and provisions 296 257.38 296 749.43Interest and similar charges (4) 19 650 327.87 20 123 950.72Foreign exchange losses 494 687.56 766 588.01Net losses on sales of securities — —

(IV) 20 441 272.81 21 187 288.16

FINANCIAL INCOME (lll - lV) 132 986 166.60 103 918 892.05

ORDINARY INCOME BEFORE TAXATION (I - ll + lll - lV) 224 890 580.05 142 715 411.78

Exceptional revenueFrom ordinary activities 3 034.83 2 325 660.76From capital transactions 191 234.98 1 098.55Provisions written back 166 478 915.54 96 097 352.69

(V) 166 673 185.35 98 424 112.00

Exceptional expensesOn ordinary activities 87 249 058.93 16 468 585.83On capital transactions 206 022.06 1 353.10Depreciation and provisions — 5 903 429.43

(VI) 87 455 080.99 22 373 368.36

EXCEPTIONAL INCOME (V - Vl) 79 218 104.36 76 050 743.64

TAXES ON INCOME (Vll) 49 697 914.19 26 404 610.82

TOTAL REVENUE (l + lll + V) 592 703 196.08 308 191 034.39

TOTAL EXPENSE (ll + lV + Vl + Vll) 338 292 425.86 115 829 489.79

NET INCOME 254 410 770.22 192 361 544.60

(1) of which, revenue relating to previous years — —

(2) of which, expenses relating to previous years — 1 031.08

(3) of which, revenue in respect of subsidiaries 152 070 903.20 123 073 929.11

(4) of which, expenses in respect of subsidiaries 1 673 959.27 1 499 234.10

1998 1997


67

Appendix to the financial statementsin euros

The balance sheet totals before appropriations for the year endedDecember 31, 1998 were EUR3 724 508 639.69.

The statement of income for the year, presented in tabular form,shows:

— Total revenue 592 703 196.08

— Total expense 338 292 425.86

Net income for the financial year 254 410 770.22

The accounting period consisted of twelve months and coincided withthe calendar year.

These notes and tables form an integral part of the accounts.

THE YEAR’S ACTIVITIES Main features of the year’s activities are covered in the ManagingPartners’ report to the Annual Meeting of Stockholders, convened toconsider the 1998 accounts.

ACCOUNTING METHODS AND PRINCIPLESThe methods of valuation and determination of the financial resulthave been applied on a basis consistent with previous years.

The accounts for the year to December 31, 1998 have been preparedand presented in conformity with the accounting rules and with dueregard to the principles of prudence, separation of accounting yearsand continuity of trading.

Specific valuation methods used in the preparation of the accountswere as follows:

a) Intangible fixed assets

The “Concessions, patents and similar rights” consist mainly ofpurchases of computer software; these items are written offaccording to their relative importance, either within 12 months orover a 3-year period.

“Other intangible fixed assets” are vehicle parking rights, writtenoff over a 40-year period in accordance with the fiscal rule.

b) Tangible fixed assets

● Gross values

Tangible fixed assets are valued at historic cost, increased whereapplicable by the legal revaluation undertaken in 1976/1978.

● Depreciation

Is calculated on a straight-line basis and the asset lives used are:

- Buildings 30 years,

- Other tangible fixed assets 10 years, with the exception ofcomputer equipment where a life of 5 years is used.

c) Financial fixed assets

Stockholdings

● Gross values: stockholdings are valued at historic cost,increased where applicable by the revaluation undertaken in1976/1978.

● Net values: generally, the net values appearing in the balancesheet are not greater than those which would be used as theresult of a consolidation by the equity method, with thefollowing exceptions:

- for Manufacture Française des Pneumatiques Michelin, dueto the existence of potential capital gains on various tangibleassets and also to the fact that there are intangible assets notrecorded in the balance sheet.

Note, however, that the provision for depreciation previouslymade against the value of this stockholding has again beenpartly written back this year, as a consequence of thecompany’s positive financial result.

- for Pardevi S.A., the valuation of which, in accordance withaccounting and fiscal rules, takes into account the potentialgains on its portfolio.

Other financial investments

Holdings that the Company intends to retain but which are notdirectly related to its business activity are grouped under thisheading.

They are valued consistent with stockholdings.

d) Accounts receivable

Appear at nominal value.

e) Paid in excess of par

This heading relates mainly to premiums on issues of stock and onthe conversion of bonds into shares.

f) Tax-regulated reserves

Consist almost entirely of capital gains reinvested in the writing-down of financial securities in accordance with the old article 40of the Code Général des Impôts. The amounts were classed as“Regulated depreciation” prior to the legal revaluation undertakenin 1976/1978.

g) Foreign exchange operations

The revenues from and expenditures on currency dealings arerecorded at their exchange values at the date of the transaction.

Amounts receivable and payable in currency are shown in thebalance sheet, converted to euros at the December 31 exchangerate. The resulting differences are shown in the balance sheet as“foreign exchange conversion differences”, either as an asset orliability. Potential currency losses are provided for separately ascontingencies.

Forward exchange operations outstanding at the end of the yearare shown in the balance sheet. Any potential net losses likely toresult from them are provisioned, as necessary, under“Contingencies”.

h) Deferred charges

Relate to the balance of issue expenses of the 1996 bonds, writtenoff over the term of the borrowing.


68

FIXED ASSETS AND DEPRECIATIONIntangible and tangible fixed assets which are not material, together with those which are almost entirely written off, are not included in thetable below.

FIXED ASSETSGross value

atJanuary 1

Acquisitions,New loans,Increases in

holdings

Sales,Taken out of service,Repayment of loans,Decreases in holdings

Gross valueat

December 31

Intangible fixed assets 5 685 563 60 570 — 5 746 133Tangible fixed assets 2 547 371 10 188 210 988 2 346 571

8 232 934 70 758 210 988 8 092 704

Financial fixed assets:Stockholdings 2 610 841 642 — 194 111 2 610 647 531Receivables related to stockholdings 1 349 292 128 68 770 778 77 118 591 1 340 944 315Other financial investments 3 788 198 — — 3 788 198Loans 78 177 — — 78 177Other financial assets 681 — — 681

3 964 000 826 68 770 778 77 312 702 3 955 458 902

TOTAL 3 972 233 760 68 841 536 77 523 690 3 963 551 606

DEPRECIATIONBalance

atJanuary 1

Increases:provisions

during the year

Decreases:Depreciation

related to disposals

Balanceat

December 31

Intangible fixed assets 5 623 101 74 298 — 5 697 399Tangible fixed assets 2 063 161 95 390 199 077 1 959 474

7 686 262 169 688 199 077 7 656 873

Deferred charges 15 311 425 296 257 14 758 573 849 109

TOTAL 22 997 687 465 945 14 957 650 8 505 982

PROVISIONSBalance

at January 1Increases: Provisions

during the yearDecreases: Written back

during the yearBalance

at December 31

Tax-related provisions 61 597 677 — — 61 597 677Provisions for contingencies and charges:Contingencies (1) 105 190 314 — 105 190 314 —Deferred charges — — — —

105 190 314 — 105 190 314 —

Amortization (2) 493 956 612 914 694 61 289 094 433 582 212

TOTAL 660 744 603 914 694 166 479 408 495 179 889

of which, provisions and written back:- operating — —- financial — 492- exceptional — 166 478 916- transfer to revaluation reserve 914 694

(1) The write-back of EUR105 189 822 in the provision for contingencies relates to steps taken by the SPIKA affiliate to cover its participation in therestructuring of Banque Industrielle et Mobilière Privée, designed to release the bank from the majority of its real estate commitments. The restructuring, which commenced in 1993, was finalized in 1998.

(2) Movements in the provision for amortization concerned the following:- Provisioned: Various holdings 914 694

Accounts receivable —- Written back: MFPM stockholding 45 734 705

SPIKA stockholding 15 554 389

in euros


69

DETAILS OF CERTAIN BALANCE SHEET ITEMS

MATURITY OF AMOUNTS DUE AND PAYABLE

Related to companies

Subsidiaries Investments

Payables or receivablesin the form of

Bills of exchange

Stockholdings (net value) 2 177 065 333 1 —Receivables related to stockholdings 1 340 944 315 — —Other financial fixed asset investments — 3 788 198 —Other amounts receivable 136 422 685 — —Other borrowings 32 096 879 — —Other amounts payable 60 427 375 — —

DUE Gross due within one year due after one year

PAYABLE Gross due within one year due after oneand within five years due after five years

Fixed assetsReceivables related to stockholdings 1 340 944 315 625 805 975 715 138 340Loans 78 177 1 038 77 139Other financial fixed assets 681 — 681

Current assetsAccounts receivable 159 681 818 144 087 475 15 594 343

TOTAL 1 500 704 991 769 894 488 730 810 503

Convertible bonds 18 372 18 372 — —Other bonds 322 612 819 17 714 784 — 304 898 035 (1)Amounts owed to financial institutions — — — —Other borrowings 32 096 879 32 096 879 — —Taxes and social charges 32 483 780 32 483 780 — —Fixed assets and related accountss 20 421 20 421 — —Other amounts payable 62 114 970 62 114 970 — —

TOTAL 449 347 241 144 449 206 — 304 898 035 (1)

(1) 1996 borrowing at 6.7% repayable in full at par, February 19, 2006.

Balance sheet item

Convertible bonds —Other bonds 17 704 209Amounts owed to financial institutions —Other borrowings 283 734Taxes and social charges 262 218Other accounts payable 1 138 786

TOTAL 19 388 947

ACCRUED INTEREST AND INVOICES PENDING

in euros

(included in creditors)


70

SUSPENSE ACCOUNTS PAYMENTSAND REVENUES IN ADVANCEPayments in advance were in respect of trading expenses,in the sum of 4 718

REVALUATIONRevaluation differences were 531 791 000of which: - 32 091 related to land,

- 531 758 909 related to stockholdings.

CAPITAL STOCK Number Nominal value(FRF each)

1. Shares issued at January 1 136 892 968 12

2. Shares issued during the year (1) 822 905 12

3. Shares redeemed during the year — —

4. Shares issued at December 31 137 715 873 12

(1) 822,905 shares were issued in 1998 as stock dividends and:- the consequent increase in capital stock was

12 x 822,905 = FRF9 874 860 or, EUR1 505 413- the amount paid in excess of par value increased by

(331-12) x 822,905 = FRF262,506,695 or, EUR40 018 888

TRADING REVENUEThe change in the figure for trading revenue is the result of the alterationmade at the end of 1997. The role of the Centre de Technologie, whichinitiates and fosters long-term technological development, wasdistinguished from that of the Product Lines, which have a worldwide briefto manage the development and industrialization required to respondrapidly to changes in demand in tire markets and for which, the ProductLines provide manufacturing and marketing facilities. This distinction hasled to an increase in external charges, now recorded as research expenseincurred by the Company, and has had a significant effect on the tradingresult.Trading revenue of 272 554 108 consisted wholly of royalties.It was made up as follows:- France 56 396 172- Outside of France 216 157 936

272 554 108

TAXES ON INCOMEThe charge for corporate taxes was 49 697 914 in 1998.

MARKET EXPOSURE

a) Interest rate riskFollowing the issue of bonds to the value of FRF2 billion in February1996, the Company entered into an interest rate swap agreement forFRF500 million. Outside of this, the borrowing is financed at three-month market rates.There are no commitments to other interest rate instruments.

b) Foreign exchange riskAt December 31, 1998 the Company had receivables to a total netvalue of 79.4 million in respect of accrued royalties, due within sixmonths. The amounts will be received either in one of the majorEuropean currencies or in US dollars and are included in the balancesheet at their euro exchange value as at the end of the year. Provision

has been made as necessary to cover potential exchange risk. It is in anycase partially covered by forward sales and for these, the minordifferences between the amounts of currency payable and receivableare included, where appropriate, in ascertaining the balance sheetprovision for foreign exchange conversion differences.

c) Risk on stock heldThe Company holds:- stock, both in associated companies and as long-term investments.

The valuation of these reflects their utility to the Company and alsotheir potential worth on realization;

- stocks, shares and securities to an overall net value of 40 million. Theirquoted price amounted to 41.5 million.

MANAGEMENT COMPENSATIONThe Company is administered by Gérants (Managing Partners) who arealso Associés commandités (General Partners). In this latter capacity theybenefit from a global allocation of income as prescribed by the Articles andshared between all of the General Partners. The Managing Partners do nototherwise receive salary or benefits in kind from the Company or fromcompanies which it controls.

Management 8 —Supervisory/Technical — —Staff 25 —Hourly paid — 1

33 1

POSTRETIREMENT INDEMNITY LIABILITIESThe Company’s obligations under this heading are detailed in theConvention Collective. The total actuarial valuation of the liability as atDecember 31, 1998 was approximately 0.6 million. It was not provided forin the accounts..

INCREASES / DECREASESIN THE FUTURE TAX CHARGE

Type of temporary difference Amount

Increases:Tax-regulated provisions —

TOTAL —

Increases in the future taxation charge —Decreases:Provisions not deductible in the year in which they were made:- Contingencies and charges —- Amortization —Other 354 332

TOTAL 354 332

Decreases in the future taxation chargeCorporate tax at 19% 67 323

+cont. 10% +cont.15% 16 831

Depreciation classed as deferred —Losses carried forward —Long-term amortization of investments —

in euros

Permanentemployees

AVERAGE NUMBEROF EMPLOYEES

Temporarystaff


71

INVESTMENT PORTFOLIO AT DECEMBER 31, 1998

Holding Inventory value

Stockholdings and other fixed asset securities, portfolio value more than EUR152 449 :

Compagnie Financière Michelin 12 252 920 shares 1 502 100 738.75

Manufacture Française des Pneumatiques Michelin 3 199 580 — 485 934 412.35

Participation et Développement Industriels S.A. “Pardevi” 1 199 986 — 144 367 415.04

Société de Technologie Michelin 99 994 — 15 243 987.03

Spika S.A. 199 986 — 25 914 518.79

Société de Participations dans les Entreprises Régionales en Expansion “Siparex” 121 987 — 1 909 893.66

Siparex Associés 115 152 — 1 542 911.97

Société Financière d’Innovation du Sud-Est “Sudinnova” 21 786 — 335 392.72

Société d’Exportation Michelin 19 980 parts 3 264 141.27

Société Antillaise des Pneumatiques Michelin 500 — 240 120.06

Other stockholdings (Total) 0.76

Stocks, shares and securities:

Treasury stock 1 196 527 shares 40 189 771.29

Securities 640.30

Shares, New York stock exchange 34 607 — 126 297.33

in euros


72

LIST OF AFFILIATES AND STOCKHOLDINGS

Capitalstock

(1)

Otherstockholders’

equitybeforeIncome(Loss)

(1)

%Holding

Value of holdingin accounts

Loans andAdvancesmade by

theCompanynot yetrepaid

Guaranteesand

Endorse-ments

given bythe

Company

Net salesin last

accountingperiod

Income(Loss)in last

accountingperiod

Dividends receivedby the

Companyduring

the yearGross Net

A - Details of affiliates and stockholdings(portfolio value exceeding 1% of the capital stock of the Company)

1 - Subsidiaries (holding of more than 50%)

Société d’Exportation MichelinPlace des Carmes-Déchaux, 63000 Clermont-Ferrand, France

FRF1 000 000 FRF13 409 242 99.90 4 178 835 3 264 142 — — 8 653 571 1 025 188 —

Participation et Développement Industriels S.A. “Pardevi”23, rue Breschet, 63000 Clermont-Ferrand, France

FRF120 000 000 FRF214 673 703 99.99 159 727 854 144 367 415 — — — 1 629 168 5 488 101

Compagnie Financière Michelin12, route Louis-Braille, 1763 Granges-Paccot, SwitzerlandSFR1 404 831 200 SFR2 443 066 373 91.67 1 502 100 739 1 502 100 739 — — — 180 784 915 75 150 412

Société de Technologie Michelin23, rue Breschet, 63000 Clermont-Ferrand, France

FRF100 000 000 — 99.99 15 243 987 15 243 987 — — — 1 665 385 —

Spika S.A.23, rue Breschet, 63000 Clermont-Ferrand, France

FRF20 000 000 FRF50 739 215 99.99 25 914 519 25 914 519 45 961 105 — — 17 912 254 —

2 - Stockholdings (holding between 10 and 50%)

Manufacture Française des Pneumatiques MichelinPlace des Carmes-Déchaux, 63000 Clermont-Ferrand, FranceFRF2 000 000 000 FRF2 493 495 926 39.99 902 534 145 485 934 412 486 582 504 — 3 829 906 475 149 466 589 —

B - General information regarding other affiliates and stockholdings

1 - Affiliates not included in A:

- In France — — (2) 9 351 905


2 - Stockholdings not included in A:

- In France 240 553 240 120 — — 27 746


(1) In local currency(2) Company wound up in 1998

in euros


73

CHANGES IN STOCKHOLDERS’ EQUITY (Balance sheet before distributions, non-consolidated)

1997 1998

Result for the year (in EUR thousands and EUR per share)

Statement of Income

Income 192 362.00 254 411.00

per share 1.41 1.85

Proposed Dividend

Total 79 309.00 88 146.00

per A capital share 0.59 0.66

per A jouissance and B share 0.58 0.64

Detailed changes in stockholders’ equity (in EUR thousands) 1998

A) 1 - Stockholders’ equity at end of 1997 financial year 3 082 447

2 - Distributions voted by the Annual Meeting of Stockholders 102 180

3 - Balance brought forward in 1998 financial year 2 980 267

B) Retrospective adjustments to the balance brought forward in 1998:

1 - to Capital stock and paid in excess of par —

2 - to Reserves —

C) Stockholders’ equity brought forward after retrospective adjustments (A3 + B)) 2 980 267

D) Changes during the year:

1 - Capital stock 1 505

2 - Paid in excess of par 40 019

3 - Revaluation differences (1 106)

4 - Reserves —

5 - Tax-related provisions —

6 - Adjustment of retained earnings brought forward 65

7 - 1998 Net income 254 411

E) Stockholders’ equity, before Annual Meeting, (C + D) 3 275 161

F) Total change in stockholders’ equity during the year (E – C) 294 894

G) of which: variation due to change in capital stock and premiums 41 524

H) Change in stockholders’ equity during the year excluding changes in the capital stock and premiums (F - G) 253 370

in euros


74

D1: – 1997 stock dividends = 822 905 shares822 905 x 12 = FRF9 874 860, 1 505

D2: – Paid in excess of par on the shares issued as stock dividends, 40 019

D3: – Revaluation reserve written back (1 106)

D6: – Dividend attributable to treasury stock 65

Sources

Balance of retained earnings brought forward 20 245 427.65

Net Income for the financial year 254 410 770.22

Appropriations

Legal reserve 150 541.27

Tax-regulated reserves for long-term capital gains 112 179 543.93

Dividends

A capital shares 7 500.00A jouissance and B shares 88 138 158.72

Share attributable to the General Partners, as provided by the Articles 5 736 585.20

Taxes on distributions 15 416 772.44

Other reserves 30 500 000.00

Balance of retained earnings carried forward 22 527 096.31

TOTAL 274 656 197.87 274 656 197.87

APPROPRIATIONS OF INCOME FOR THE YEAR 1998

(in euros)

Notes:

in euros(in EUR thousands)


75

19981997199619951994

I - Capital at December 31

a) Capital stock 197 888 729.00 210 802 404.00 219 766 061.00) 250 430 381.00 251 935 794

b) Issued common shares 108 172 081.00 115 231 094.00 120 130 905.00) 136 892 968.00 137 715 873

c) Issued non-voting shares with priority dividend — — — — —

d) Maximum future issues of shares:arising from convertible bonds 20 109 544.00 20 299 043.00 16 080 530.00) — —arising from warrants 10 092 457.00 — — — —arising from loyalty bonus 5 734 506.00 — — — —

II - Annual results

a) Trading revenue, excluding taxes 67 170 645.44 70 846 029.90 79 570 761.33) 84 605 104.22 272 554 108.48

b) Income before taxation and netdepreciation and provisions 50 944 474.71 58 483 781.87 172 741 401.47) 128 682 124.31 138 095 222.66

c) Taxes on income — 10 293 519.24 (1 995 163.40) 26 404 610.82 49 697 914.19

d) Employees’ share of incomefor the year — — — — —

e) Net income after taxation, depreciation and provisions 37 847 658.74 56 095 049.25 121 122 242.07) 192 361 544.60 254 410 770.22

III - Results per share

a) Income after taxation but before depreciation and provisions 0.47 0.51 1.45) 0.75 0.64

b) Net income after taxation,depreciation and provisions 0.35 0.49 1.01) 1.41 1.85

c) Dividend:– A capital share 0.36 0.43 0.52) 0.59 0.66– A jouissance and B share 0.34 0.42 0.50) 0.58 0.64

IV - Personnel

a) Average number of employees during the year 35.00 33.00 34.00) 32.00 33.00

b) Total salaries & wages paidduring the year 1 324 832.99 1 202 410.54 1 601 588.56) 1 258 445.54 1 299 028.20

c) Cost of social security and employee facilities 520 581.71 473 922.01 536 429.51) 482 490.79 501 794.58

SUMMARY OF RESULTS FOR THE YEARS 1994 TO 1998 in euros

77

1998 Paris-Dakar - Haydon

MI C H E L I N GR O U P

Consolidated financial statements 1998


78

Consolidated balance sheets at December 31in French francs

Fixed assetsIntangible fixed assets 1 835 748 1 189 248 646 500 452 565Acquisition differences 2 519 520 969 376 1 550 144 1 727 021Tangible fixed assets 80 410 694 48 018 777 32 391 917 30 889 050 Financial investments (1) 3 427 126 778 899 2 648 227 2 514 222Investments in affiliates at equity 89 100 89 100 252 665

88 282 188 50 956 300 37 325 888 35 835 523

Current assetsInventories and work in process 18 392 723 547 615 17 845 108 16 176 570Trade receivables and related accounts (2) 13 768 456 410 232 13 358 224 12 956 832Other receivables (2) 2 498 325 8 582 2 489 743 2 812 916Stocks, shares and securities 1 853 454 — 1 853 454 478 496Cash and equivalents 5 350 714 5 350 714 6 777 131

41 863 672 966 429 40 897 243 39 201 945

Suspense and related accounts 5 970 067 5 970 067 6 680 586

TOTAL ASSETS 136 115 927 51 922 729 84 193 198 81 718 054

(1) of which falling due within one year 163 337 151 309(2) of which falling due after more than one year 109 666 117 219

Stockholders’ equityCapital stock 1 652 590 1 642 716Paid in excess of par 11 407 387 11 144 881Consolidated reserves 14 147 856 11 103 419Consolidation translation adjustments (5 123 777) (3 733 883)Net income for the year 3 513 417 3 882 944

25 597 473 24 040 077

Minority interests— in Equity 1 753 056 1 673 776— in Income 249 536 227 894

2 002 592 1 901 670

TOTAL STOCKHOLDERS’ EQUITY 27 600 065 25 941 747

Subordinated debt (3) 5 297 473 5 671 479

Provisions for contingencies and charges 12 425 384 13 980 832

Creditors (3)Borrowings and financial debts 19 957 796 18 404 622Accounts payable - trade and similar 8 612 294 6 975 847Other creditors 9 494 494 9 838 840

38 064 584 35 219 309

Suspense and related accounts (3) 805 692 904 687

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 84 193 198 81 718 054

(3) of which: falling due after more than one year 14 487 951 15 968 449of which: falling due within one year 29 679 798 25 827 026

1998 1997

NetNetDepreciationand provisionsGross

1998 1997

(in FRF thousands)


79

Consolidated statementsof income for the years ended December 31in French francs

1998 1997

Trading revenueNet sales 81 900 424 79 691 936Provisions written back 1 154 788 1 169 280Other revenue 2 886 908 2 416 576

85 942 120 83 277 792

Trading expensesPurchases adjusted for inventory change 26 849 103 28 312 484Personnel expense 28 591 754 26 961 290Taxes and similar expense 1 341 294 1 364 268Depreciation 4 778 605 4 479 289Provisions 1 632 517 1 773 954Other expense 15 708 656 13 212 112

(78 901 929) (76 103 397)

TRADING INCOME 7 040 191 7 174 395

Financial revenueOrdinary financial revenue 1 269 380 1 303 372Provisions written back 42 503 48 340

1 311 883 1 351 712

Financial expensesOrdinary financial expense 2 731 785 2 788 340Depreciation and provisions 22 591 65 720

(2 754 376) (2 854 060)

FINANCIAL INCOME (EXPENSE) (1 442 493) (1 502 348)

INCOME FROM ORDINARY ACTIVITIES OF THE FULLY CONSOLIDATED COMPANIES 5 597 698 5 672 047

Exceptional revenueProvisions written back 1 642 833 1 333 015Other revenue 1 349 422 1 696 124

2 992 255 3 029 139

Exceptional expensesDepreciation and provisions 765 801 722 352Other expense 1 923 050 2 173 054

(2 688 851) (2 895 406)

EXCEPTIONAL INCOME (EXPENSE) 303 404 133 733Depreciation of goodwill and sundry acquisition differences 132 737 128 451Taxes on income 2 017 757 1 569 560

INCOME OF THE FULLY CONSOLIDATED COMPANIES AFTER TAXATION 3 750 608 4 107 769Share of income of affiliates 12 345 3 069

NET INCOME 3 762 953 4 110 838of which: attributable to Michelin Group 3 513 417 3 882 944

attributable to minority interests 249 536 227 894

(in FRF thousands)


80

1998 1997

OPERATING ACTIVITIESNet income 3 762 953 4 110 838Depreciation and amortization 4 919 049 4 633 479Writing-down provisions, contingencies and charges (104 254) (16 379)Capital gains (losses) on fixed asset disposals (312 868) (236 689)Other (88 548) (69 083)Operating cash flow 8 176 332 8 422 166Change in inventories, receivables and payables (1 099 156) 632 321

NET CASH PROVIDED BY OPERATING ACTIVITIES 7 077 176 9 054 487

INVESTING ACTIVITIESAcquisition of tangible and intangible fixed assets (7 700 126) (6 534 102)

Increase in financial fixed assets (1 372 597) (964 349)Total (9 072 723) (7 498 451)Disposal of tangible, intangible and financial fixed assets 938 223 1 181 490Reduction in financial fixed assets 335 476 196 572Total 1 273 699 1 378 062Net capital investment in the period (7 799 024) (6 120 389)Change in inventories, receivables, payables and sundries 131 958 116 778

NET CASH USED IN INVESTING ACTIVITIES (7 667 066) (6 003 611)

FINANCING ACTIVITIESIncrease in common stock 273 046 4 542 352Distributions paid in the period (899 508) (736 540)Change in consolidated total (626 462) 3 805 812Change in financial debt 743 677 (6 437 071)Change in inventories, receivables and payables (23 554) (93 629)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 93 661 (2 724 888)Effect of changes in exchange rates and scope of consolidation 23 157 112 439

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (473 072) 438 427Cash and cash equivalents at beginning of period (782 950) (1 221 377) Cash and cash equivalents at end of period (1 256 022) (782 950)

Consolidated statement of cash flowsin French francs (in FRF thousands)

The consolidated accounts have been prepared in accordance with currentFrench regulations; since last year there has been no change in themethod of consolidation. Changes in the scope of consolidation made nosignificant impact.

PRINCIPLES OF CONSOLIDATION

Basis of consolidation— full consolidation:

Except as stated below, all the industrial, commercial, financial andother companies which Compagnie Générale des ÉtablissementsMichelin controls directly or indirectly.

— consolidated by the equity method:Companies in which Compagnie Générale des ÉtablissementsMichelin holds a direct or indirect interest of between 20% and 50%.

— omitted from consolidation:Companies which are covered by article 357-4 of the law of July 24, 1966.

Accounting policies

1. As a general rule, the accounting periods of the consolidated companiescoincide with the calendar year and the balance sheets and statementsof results used in the consolidation are those submitted for the approvalof their annual meetings. All of the accounts are subject, as necessary,to reclassification to conform to Group accounting policies.

2. The accounts of foreign subsidiaries have been converted into Frenchfrancs using:

— the rate of exchange at December 31 for balance sheet accounts,with the exception of Brazil where the currency devaluation ofJanuary 1999 has been taken into account.

— average exchange rates for income statements, except forcountries with strong inflation where the December 31 exchangerate has been used. In total, these are not material.

Appendix to the consolidated financialstatements at December 31, 1998


81

in French francs

3. The principal adjustments and restatements made have been to thefollowing:— Inter-Group dividends have been eliminated from the results.— Unrealized profits and losses on exchange are included in the

results, regardless of local rules.— The depreciation of tangible fixed assets of the major Group

companies has been recalculated using consistent asset lives on astraight line basis and applied to original cost, increased wherenecessary as a result of legal revaluations.

— The industrial fixed assets of Michelin (Nigeria) Limited have beenfully depreciated in the consolidated accounts.

— Accounting for leasing contracts is as described later underAccounting Principles.

— Unrealized profits on inventories of finished goods derived frominter-company sales have been eliminated.

— Movements in the financial year concerning either tax-regulatedprovisions or other statutory provisions have been excluded fromthe results. The same principle has been applied to movements inthe provisions for depreciation on investments in the consolidated companies, whether allowable or not for local tax purposes.

— Withholding taxes not recoverable on dividends received fromconsolidated companies have been charged as an expense.

— Acquisition differences have been determined and theiramortization calculated as noted later under AccountingPrinciples.

— The above restatements have given rise, where appropriate, to thecomputation of a provision for deferred taxation corresponding tothe tax position of each company vis-a-vis its local legislation.Provision for tax liability, calculated using the deferred tax method,is made company by company; the balance of taxes recoverable isonly taken into account where it is material and is likely to bereceived in the short or medium term. Variations in deferred taxcharges are recorded in the statement of income.

Changes recorded in the restated headings which have theircounterpart either in the results, the consolidation difference or theprovision for deferred taxation, have been split where appropriatebetween Group and minority interests.

ACCOUNTING PRINCIPLESAND VALUATION OF ASSETS

The consolidated accounts for the year to December 31, 1998 havebeen prepared and presented in conformity with the accounting rulesand with due regard to the principles of prudence, separation ofaccounting years and continuity of trading.The various balance sheet items were computed as follows:


Items shown in the balance sheet under the heading “Intangible FixedAssets” consist mainly of the values of computer software, amortizedover periods of between one and three years, plus some items ofgoodwill, completely written down.

Acquisition differences

On first consolidation of an acquisition the difference consists of theexcess of the cost of the investment over the fair value of the assetsacquired.Differences are capitalized on the first consolidation of industrialcompanies and, after harmonization of the net values of theirproduction facilities in accordance with Group accounting practice, areamortized on a straight-line basis over a period of 20 years. Their assetvalues are examined annually.

Other acquisition differences recorded during an accounting periodare amortized in the year.Negative acquisition differences are shown in the balance sheet as aprovision. Provisions are written back as necessary, reflecting changesin the risk associated with the companies acquired.


Land, buildings and plant are valued at original cost, increased wherenecessary as a result of legal revaluations.Depreciation is calculated on a straight-line basis and the principalasset lives used are:— Buildings: 25 years,— Plant & machinery, fixtures and fittings: 7 to 12 years,— Other tools and equipment: 2 to 12 years.Industrial assets which are subject to long term leasing contracts areshown in the balance sheet at cost and are depreciated in accordancewith Group policy. The corresponding debt is shown as a balancesheet liability.

Stockholdings and other financial investments

Stockholdings in companies consolidatedby the equity methodThe value of stock in companies consolidated by the equity methodrepresents the share of the stockholders’ equity of these companiesheld by the Group, applying the principles of consolidation that havebeen used.

Non-consolidated stockholdings and other financial fixed assetsThe gross value is primarily the cost of acquisition less purchaseexpenses, except in cases where local regulations have requiredrevaluation.The portfolio valuation is at the lower of its quoted value or the valuewhich would result upon consolidation by the equity method. Aprovision for writing down is made where the portfolio value is lessthan recorded value.

Inventories

In general, inventories are valued at weighted average cost or on thefirst in, first out method (FIFO).Finished goods are valued at the lower of cost or market value andwhere necessary, provision is made for depreciation.

Trade receivables and related accounts

Trade receivables are recorded at nominal value, net of a provision fornon-recovery determined either individually or according to agingcriteria.

Suspense and related accounts

Recorded under this heading are mainly:— charges to be spread over several years,— deferred tax assets accounted for locally, as referred to above

under Accounting Policies.

Subordinated debt

Subordinated debt has a predetermined maturity and is subject tospecial conditions concerning the payment of interest andreimbursement of principal. In the event of a dissolution or courtsupervision, it has a ranking inferior to that of all other creditors andits position is similar to that of common stock. In the balance sheet,therefore, subordinated debt is shown immediately followingstockholders’ equity.


82

Registered Equity

1. Ultimate Parent Registered Office Country number interest %

- Compagnie Générale des Établissements Michelin Clermont-Ferrand France 855 200 887

2. Full consolidation

— Industrial companies- Manufacture Française des Pneumatiques Michelin Clermont-Ferrand France 855 200 507 96.07- Société Michelin de Transformation des Gravanches Clermont-Ferrand France 344 181 086 95.79- Société du Caoutchouc Synthétique Michelin Bassens France 328 525 746 96.07- Pneu Laurent Avallon France 425 920 212 96.07- Wolber Soissons France 715 780 540 96.07- Pneumatiques Kléber Laxou France 552 008 831 96.07- Caoutchouc Manufacturé et Plastiques Versailles France 322 804 931 96.07- Kléber Reifen GmbH Saint-Ingbert Germany 93.48- Michelin Reifenwerke KGaA Karlsruhe Germany 93.45- Michelin Kronprinz Werke GmbH Solingen Germany 47.66- Sociedade Michelin de Participações Indústria e Comércio Ltda. Rio de Janeiro Brazil 93.45- Michelin North America (Canada) Inc. New Glasgow Canada 93.45- Michelin ShenYang Light Truck & Passenger Tire Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Rubber Components Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Tire Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Truck Tire Co., Ltd. Liaoning Province China 65.42- Industria Colombiana de Llantas S.A. Cali Colombia 91.93- Neumáticos Michelin, S.A. Madrid Spain 90.12- Michelin North America, Inc. New York United States 93.45- Michelin Aircraft Tire Corporation Wilmington United States 93.45- American Synthetic Rubber Corporation Wilmington United States 93.45- Taurus Truck Tyre and Trading Ltd. Budapest Hungary 93.39- Taurus Agricultural Tyres Ltd. Nyíregyháza Hungary 93.39- Società per Azioni Michelin Italiana Turin Italy 93.45- Michelin Okamoto Tire Corporation Ohta-City

Gunma-Ken Japan 85.42- Industrias Michelin Mexico D.F. Mexico 93.45- Michelin (Nigeria) Limited Nigeria Nigeria 74.76- MSF Tire & Rubber, Inc. Muntinlupa City Philippines 37.68- Stomil-Olsztyn S.A. Olsztyn Poland 50.33- Michelin Tyre Public Limited Company England United Kingdom 93.45- Michelin Gummiringar AB Stockholm Sweden 93.45- Michelin Siam Co., Ltd. Chonburi Thailand 46.74- Siam Tyre Industry Co., Ltd. Saraburi Province Thailand 46.74- Siam Tyre Phra Pradaeng Co., Ltd. Samuthprakarn Thailand 46.74- The Siam Steel Cord. Co. Bangkok Thailand 46.74

— Commercial companies- Euromaster France Grenoble France 392 527 404 80.66- Société d’Exportation Michelin Clermont-Ferrand France 855 200 317 100.00- Transityre France S.A. Clermont-Ferrand France 387 940 778 93.45- Michelin Tyre Company South Africa (Proprietary) Limited Johannesburg South Africa 93.45- Michelin Reifenverkaufsgesellschaft m.b.H. Vienna Austria 93.45- Michelin Australia Pty. Ltd. Melbourne Australia 93.45- Michelin Belux S.A. Brussels Belgium 93.45- Michelin Chile Ltda. Santiago Chile 93.45- Michelin Korea Co., Ltd. Seoul Korea 93.45- Michelin Gummi Compagni A/S Brøndby Denmark 93.45- Michelin Rehvide AS Tallinn Estonia 93.45- Michelin Retread Technologies, Inc. Wilmington United States 93.45- Oy Suomen Michelin Ab Espoo Finland 93.45- Elastika Michelin A.E. Athens Greece 93.45- Michelin Asia (Hong-Kong) Ltd. Hong Kong Hong Kong 93.45- Michelin Magyarország Kft Budapest Hungary 92.62- Kléber Italiana SpA Volpiano Italy 93.45- Michelin Tire Sales Corporation Tokyo Japan 85.42- Nihon Michelin Tire Co., Ltd. Tokyo Japan 93.45

SCOPE OF CONSOLIDATION


83

Registered EquityRegistered Office Country number interest %

- Michelin Tyre Services Company Ltd. Nigeria Nigeria 56.34- Norsk Michelin Gummi A/S Skedsmo Norway 93.45- Transityre B.V. Breda Netherlands 93.45- Eurodrive Services and Distribution N.V. Amsterdam Netherlands 93.01- Michelin Nederland N.V. Drunen Netherlands 93.45- Michelin Polska Sp. z o.o. Warsaw Poland 93.45- Michelin Companhia Luso-Pneu Ltda. Loures Portugal 93.45- Michelin Ceská republika s.r.o. Prague Czech Republic 93.45- Associated Tyre Specialists Limited England United Kingdom 93.15- Michelin Tyres Russian General Agency ZAO Moscow Russia 93.45- Michelin Asia (Singapore) Co. Pte. Ltd. Singapore Singapore 93.45- Michelin Slovensko s.r.o. Bratislava Slovakia 92.62- Michelin Slovenija Pnevmatike d.o.o. Ljubljana Slovenia 92.62- Société Anonyme des Pneumatiques Michelin Givisiez Switzerland 93.45- Michelin Siam Marketing & Sales Co., Ltd. Bangkok Thailand 46.74- Michelin Lastikleri Ticaret A.S. Istanbul Turkey 93.45- Various distribution companies in Europe

and elsewhere.— Financial and other companies

- Société Européenne de Pneumatiques Clermont-Ferrand France 344 143 680 93.31- Participation et Développement Industriels S.A. Clermont-Ferrand France 301 293 171 99.99- Spika S.A. Clermont-Ferrand France 304 690 209 100.00- Société Civile Immobilière Michelin Clermont-Ferrand France 328 441 050 96.07- Société Civile Immobilière Michelin Breteuil Paris France 328 309 281 96.07- Société des Procédés Industriels Modernes Paris France 300 203 981 96.07- Société de Technologie Michelin Clermont-Ferrand France 414 624 379 100.00- Michelin Investment Holding Company Limited Bermuda Bermuda 93.45- Plantações E. Michelin Ltda. Rio de Janeiro Brazil 93.45- Plantações Michelin da Bahia Ltda. Rio de Janeiro Brazil 93.45- Michelin Americas Research & Development Corporation Wilmington United States 93.45- Michelin Corporation New York United States 93.45- Taurus Rubber Company Ltd. Budapest Hungary 93.39- Osse River Rubber Estates Limited Nigeria Nigeria 38.13- Utagba Uno Rubber Estates Limited Nigeria Nigeria 65.23- Araromi Rubber Estates Limited Nigeria Nigeria 54.39- Waterside Rubber Estates Limited Nigeria Nigeria 74.76- MC Projects B.V. Amsterdam Netherlands 46.73- Michelin Finance (Pays-Bas) B.V. Amsterdam Netherlands 93.45- Michelin Holding (Pays-Bas) B.V. Amsterdam Netherlands 93.45- Michelin Participations B.V. Amsterdam Netherlands 92.62- Société des Matières Premières Tropicales Pte. Ltd. Singapore Singapore 93.45- Compagnie Financière Michelin Granges-Paccot Switzerland 93.45- Michelin Factoring S.A. Granges-Paccot Switzerland 93.45- Michelin Participations S.A. Granges-Paccot Switzerland 92.62- Michelin Recherche et Technique S.A. Granges-Paccot Switzerland 93.45- M.S. Enterprises Holding Co., Ltd. Bangkok Thailand 47.66- Michelin Siam Group Co., Ltd. Bangkok Thailand 46.74

3. Consolidated by the equity method- Compagnie Générale des Transports Verney Asnières France 378 340 061 41.30- Radsystem GmbH Moselle Germany 23.83- Sucat Land Corp. Makati City Philippines 18.84- Tekersan Jant Sanayi A.S. Istanbul Turkey 9.58

4. Companies omitted from consolidation- Various companies which, relatively, were not material, in accordance with the provisions of article 357-4 of the law of July 29, 1966,

concerning trading companies (consolidated accounts).

The above list, which is not exhaustive, has been prepared with specific reference to the requirements of article 248-12, decree no. 67-236 of March 23, 1967, concerning trading companies (consolidated accounts).


84

Depreciation:

Intangible Fixed Assets 954 414 261 131 – 75 575 49 278 1 189 248

Goodwill and sundry acquisition differences 894 904 127 761 – 76 – 53 213 969 376

Tangible Fixed Assets 47 426 397 4 443 491 – 1 951 949 – 1 899 162 48 018 777 (1)

49 275 715 4 832 383 – 2 027 600 – 1 903 097 50 177 401

Provision for amortization 1 472 071 510 187 – 228 447 – 8 483 1 745 328 (2)

TOTAL 50 747 786 5 342 570 – 2 256 047 – 1 911 580 51 922 729

Intangible Fixed Assets 1 406 979 483 417 – 86 624 31 976 1 835 748

Goodwill and sundry acquisition differences 2 621 925 34 224 – 76 – 136 553 2 519 520

Tangible Fixed Assets 78 315 447 7 216 709 – 2 266 906 – 2 854 556 80 410 694 (1)

TOTAL 82 344 351 7 734 350 – 2 353 606 – 2 959 133 84 765 962

(1) of which: France 20 523 516

Western Europe excluding France 25 556 909

North America and Mexico 25 384 779

Other countries 8 945 490

Gross valueat Dec 31

Conversion and sundrydifferences

DiminutionsAdditionsGross valueat Jan 1

Peugeot S.A. (1) Paris 3.5 % 21 414 940 (1 255 663) 393 444 (2)

Other companies, loans, long,term advances and others 2 254 783

TOTAL 2 648 227

(1) Accounting year ended December 31, 1997.

(2) Based on the average quoted price for December 1998 this holding was valued at FRF1,491 million.

Net value ofholding/loan

at December 31

Last accountingperiod income

(loss)

Stockholders’equity

Proportionof capital held

RegisteredofficeCompany





(2) of which: on financial fixed assets 778 899

on inventories 547 615

on receivables 418 814

Balanceat Dec 31

Conversionand sundrydifferences

Amounts writtenback in the

financial year

Provisionsin the

financial year

Balanceat Jan 1

3) FINANCIAL FIXED ASSETS

2) DEPRECIATION AND PROVISIONS

1) FIXED ASSETS

(in FRF thousands)

NOTESin French francs


85

(in FRF thousands)

5) SUMMARY OF STOCKHOLDERS’ EQUITY AND MINORITY INTERESTS

6) SUBORDINATED DEBT

Capital stock 1 642 716 9 874 1 652 590

Paid in excess of par 11 144 881 262 506 11 407 387

Consolidated reserves 11 103 419 431 3 068 219 – 24 213 14 147 856

Consolidation translation

adjustments – 3 733 883 – 1 389 894 – 5 123 777

Statement of income,

Group share 3 882 944 – 814 725 – 3 068 219 3 513 417 3 513 417

Stockholders’ equity 24 040 077 272 811 – 814 725 — – 1 414 107 3 513 417 25 597 473

Minority interests:

in Stockholders’ equity 1 673 776 235 143 111 – 64 066 1 753 056

in Net income 227 894 – 84 783 – 143 111 249 536 249 536

TOTAL 25 941 747 273 046 – 899 508 — – 1 478 173 3 762 953 27 600 065

Balanceat Dec 311998 result


Allocationof balanceof retained

earningsDistributionsIncreases

in capitalBalanceat Jan1

This is a borrowing of USD1.1 billion for a term of 15 years, maturing in May 2005. Interest is normally due quarterly and other special conditionsattached to this borrowing are noted under Accounting Principles.It was decided, within the terms of the contract, to limit the amount of subordinated debt at December 31, 1998 to USD951 million.

Banque Industrielle et Mobilière Privée 165 553 – 165 553 (1) —

Compagnie Générale des Transports Verney 41 160 8 715 49 875

Radsystem GmbH 5 945 – 2 308 3 637

Motor Tyre Services Public Limited Company 4 844 – 4 844 (2) —

Sucat Land Corp. 19 442 79 19 521

Tekersan Jant Sanayi A.S. 8 747 293 9 040

245 691 – 163 618 82 073

Other companies 6 974 53 7 027

TOTAL 252 665 – 163 565 89 100

Net valueof holding at Dec 1

Changesduring the year

Net valueof holding at Jan 1Company

4) STOCKHOLDINGS CONSOLIDATED BY THE EQUITY METHOD

(1) Holding sold in 1998 (2) Became majority interest in 1998

Other changes arose mainly from the financial results of the companies and dividends distributed in respect of the 1997 financial year.

in French francs


86

(in FRF thousands)

Dec 31, 1998 Dec 31, 1997

Provision for losses on foreign exchange 10 495 19 684Provision for pensions and similar obligations 9 601 222 9 837 351Provision for deferred taxation 358 342 345 550Provision for restructuring costs 1 323 926 1 905 183Provision for other risks and expense 1 131 399 1 873 064

TOTAL 12 425 384 13 980 832

Tax losses carried forward and not taken into account in the calculation of deferred tax assets or in the charge for deferred tax amounted to FRF8.2 billion.

Setting aside the effect of consolidation translation adjustments andsundry items which amounted to FRF27.2 million, the change in theprovision for restructuring costs was due to:

• a writing back of provisions which had been allocated to 1998 for anamount of FRF606.1 million;

• other provisions and write-backs for a net provision of FRF52.1 million.

For the most part, the above changes are included in the exceptional result.

Convertible bonds 119 119 — —

Other bonds 3 215 785 1 215 785 — 2 000 000

Sundry borrowings and financial debt 16 741 892 10 438 277 5 584 245 719 370

TOTAL FINANCIAL DEBT 19 957 796 11 654 181 5 584 245 2 719 370

Accounts payable - trade and similar 8 612 294 8 611 506 788 —

Other debts 9 494 494 9 028 125 459 242 7 127

TOTAL (1) 38 064 584 29 293 812 6 044 275 2 726 497

(1) of which secured, 716 044

Falling due after1 and within

5 years

Falling dueafter 5 years

Falling duewithin 1 yearGross amount

10) POSTRETIREMENT INDEMNITIES AND SIMILAR LIABILITIES

In most of the countries in which the Group companies operate, commit-ments in respect of postretirement benefits are covered:

- by external organizations to whom employee and company contributionsare paid. This releases the companies from any further liability in thisregard, or

- by pension funds, which may be managed either externally or byemployees of the companies concerned. In these cases, the commitmentis generally limited to ensuring adequacy of funding and propermanagement of the funds.

Supplementary postretirement commitments, either for pensions or partialcoverage of medical expenses not met by external organizations, are of acontractual nature and, in conformity with the accounting requirements ofthe countries concerned, an actuarial provision of FRF9.6 billion is made inthe balance sheet.

Additionally, according to the rules and conventions existing in the variouscountries, employees may, upon leaving the company, receive a capital sumand/or a series of annuities. The actuarial value of these commitments notcovered by the provisions mentioned above is estimated at FRF2.8 billion.

Michelin North America Inc., New York, commenced a program of the saleand securitization of certain accounts receivable in 1994. This revolving program provides a long-term source of finance.

At December 31, 1998 the net sales of accounts receivable were USD610 million. Expenses related to the program are calculated and paidbased on readily-available market rate indices and are included as financialexpenses in the accounts.

8) DEBT

9) ACCOUNTS RECEIVABLE

7) PROVISIONS FOR CONTINGENCIES AND EXPENSES

in French francs


87

(in FRF thousands)

12) NET SALES

13) EMPLOYEES AND PERSONNEL EXPENSE

14) FINANCIAL INCOME AND EXPENSE - MARKET EXPOSURE

Commitments undertaken

Guarantees 1 066 638

Finance leases 4 088 025

Bills discounted not yet due 6 933

TOTAL 5 161 596

Commitments received

Guarantees and sureties 1 994 386

France 15.5

Western Europe excluding France 38.0

North America and Mexico 31.4

Other countries 15.1

Tires and wheels 98.7

Manufactured rubber and plastics,

maps, guides and sundries 1.3

Geographical zone % Allocation by activity %

The average number of employees in companies within the fullconsolidation was 127,241.

Corresponding personnel expense was FRF28,592 million.

Foreign exchange risks

Group policy is to cover foreign exchange exposure. As a result, variousmarket instruments are used, mainly exchange rate forward contracts oroptions. All of the related expenses, chiefly commissions paid, areaccounted for on completion of the transactions concerned.

In general, receivables and payables in currency are of a similar nature andterm. There is thus an offset and only the net exposure is covered.

The resulting income and losses, realized or unrealized, together with thecosts of coverage are recorded in the income statement.

In summary, all net risks of loss are covered by provisions.

Investments by holding companies in foreign affiliates is financed in thecurrency of the holding company’s accounts (unless a sale of theinvestment is foreseen) and the exchange exposure arising on income fromthe holdings is covered according to the above procedure.

Interest rate risks

Interest rate exposure for periods of up to one year is managed locally. A maximum amount to be financed at fixed rates for more than one yearis set for each foreign currency and exposure is controlled and coordinatedconsistently within the Group.

At December 31, 1998, net financial debt included, (in FRF millions):

- borrowings and financial debtss 19 958

- stocks, shares and securities – 1 853

- cash and cash equivalents – 5 351

12 754

- subordinated debt 5 297

TOTAL 18 051

11) OTHER COMMITMENTS

in French francs


88

The table below gives a summary of net financial debt, fixed and variable rate and by currency, after accounting for the results of all financial operationsusing market instruments.

French franc – 1 296 2 004 6.8 708 3.9

Swiss franc 498 449 4.8 947 5.2

Deutschmark 1 214 34 3.8 1 248 6.9

Peseta 532 — — 532 2.9

Italian lira 1 220 — — 1 220 6.8

Pound sterling 2 130 1 1.8 2 131 11.8

Other West European 201 19 2.0 220 1.3

Total European 4 499 2 507 6.4 7 006 38.8

US dollar 2 954 5 259 3.5 8 213 45.5

Canadian dollar 188 153 7.0 341 1.9

Total dollar zone 3 142 5 412 3.6 8 554 47.4

Other currencies 2 426 65 2.0 2 491 13.8

TOTAL 10 067 7 984 4.4 18 051 100.0

Variable rate Fixed rate Average fixedrate period Total debt % per

currencyCurrency

Risks on financial holdings

The value of non-consolidated long-term stockholdings arises both from their utility to the Group and from their potential realizable value. At December 31, 1998 there was no foreseeable risk of depreciation.

Other financial holdings are included in the balance sheet for a total ofFRF1,853.5 million. They consist mainly of short-term investments with no

associated exchange or interest rate risk. Of this amount, quoted sharesaccounted for FRF320 million and their stock exchange value at December31, 1998 was FRF342 million.

15) OTHER EXCEPTIONAL REVENUE AND EXPENSES

Other exceptional revenue 1 349 422of which: proceeds from disposals of fixed assets 0 899 742

Other exceptional expense 1 923 050of which: net value of disposals of fixed assets 0 586 874

restructuring costs (excluding provisions) 0 656 781

16) TAXES ON INCOME

The charge in the statement of income is made up: - Tax relating to the accounting year 1 695 089- Deferred tax 322 668

17) MANAGEMENT COMPENSATION

The Company is administered by Gérants ( Managing Partners) who are also Associés commandités (General Partners). In this latter capacity they benefitfrom a global allocation of income as prescribed by the Articles and shared between all of the General Partners. The Managing Partners do not otherwisereceive salary or benefits in kind from Company Générale or from companies which it controls.

(in FRF millions)

(in FRF thousands)

(in FRF thousands)

in French francs

I n d e p e n d e n t A u d i t o r s ’ r e p o r t o n t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s


89

I n d e p e n d e n t A u d i t o r s ’ r e p o r to n t h e c o n s o l i d a t e d

f i n a n c i a l s t a t e m e n t s


In accordance with the mandate given to us by your Annual Meeting of Stockholders we have audited theattached consolidated financial statements of Compagnie Générale des Établissements Michelin for thefinancial year ended December 31, 1998.

The preparation of these consolidated financial statements is the responsibility of your Managing Partners. Itis our responsibility, based upon our audit, to express an opinion on these statements.

We have conducted our audit in accordance with accepted professional standards; these standards require usto apply such auditing procedures as provide reasonable assurance that the financial statements are free frommaterial mis-statements. An audit includes examination, on a test basis, of the relevant elements whichsupport the information contained in the financial statements. It also includes an assessment of theaccounting principles used, the significant estimates made in the preparation of the financial statements andin addition, their overall presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the consolidated financial statements have been properly prepared in accordance withstatutory requirements and present fairly, in all material respects, the assets and liabilities, the financialsituation and the financial result of the group of companies included in the consolidation.

We have also examined the information relating to the Group provided in your Managing Partners’ report.We have no comment to make on the accuracy of the information provided or on its conformity with theconsolidated financial statements.





90


91

Consolidated financial statements 1998

in euros


92

Consolidated balance sheets at December 31in euros

Fixed assetsIntangible fixed assets 279 858 181 300 98 558 68 994Acquisition differences 384 098 147 780 236 318 263 283Tangible fixed assets 12 258 531 7 320 415 4 938 116 4 709 005 Financial investments (1) 522 462 118 742 403 720 383 291Investments in affiliates at equity 13 583 13 583 38 519

13 458 532 7 768 237 5 690 295 5 463 092

Current assetsInventories and work in process 2 803 953 83 483 2 720 470 2 466 102Trade receivables and related accounts (2) 2 098 988 62 539 2 036 449 1 975 256Other receivables (2) 380 867 1 308 379 559 428 826Stocks, shares and securities 282 557 — 282 557 72 946Cash and equivalents 815 711 815 711 1 033 167

6 382 076 147 330 6 234 746 5 976 297

Suspense and related accounts 910 131 910 131 1 018 449

TOTAL ASSETS 20 750 739 7 915 567 12 835 172 12 457 838

(1) of which falling due within one year 24 901 23 067(2) of which falling due after more than one year 16 718 17 870

Stockholders’ equityCapital stock 251 936 250 430Paid in excess of par 1 739 045 1 699 026Consolidated reserves 2 156 827 1 692 706Consolidation translation adjustments (781 115) (569 227)Net income for the year 535 617 591 951

3 902 310 3 664 886

Minority interests— in Equity 267 252 255 166— in Income 38 042 34 742

305 294 289 908

TOTAL STOCKHOLDERS’ EQUITY 4 207 604 3 954 794

Subordinated debt (3) 807 595 864 611

Provisions for contingencies and charges 1 894 238 2 131 364

Creditors (3)Borrowings and financial debts 3 042 546 2 805 768Accounts payable - trade and similar 1 312 936 1 063 461Other creditors 1 447 426 1 499 921

5 802 908 5 369 150

Suspense and related accounts (3) 122 827 137 919

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 12 835 172 12 457 838

(3) of which: falling due after more than one year 2 208 674 2 434 374of which: falling due within one year 4 524 656 3 937 305

1998 1997

NetNetDepreciationand provisionsGross

1998 1997

(in EUR thousands)


93

Consolidated statementsof income for the years ended December 31in euros

1998 1997

Trading revenueNet sales 12 485 639 12 148 957Provisions written back 176 046 178 256Other revenue 440 106 368 405

13 101 791 12 695 618

Trading expensesPurchases adjusted for inventory change 4 093 119 4 316 210Personnel expense 4 358 785 4 110 222Taxes and similar expense 204 479 207 981Depreciation 728 494 682 863Provisions 248 876 270 438Other expense 2 394 769 2 014 173

(12 028 522) (11 601 887)

TRADING INCOME 1 073 269 1 093 731

Financial revenueOrdinary financial revenue 193 516 198 698Provisions written back 6 480 7 369

199 996 206 067

Financial expensesOrdinary financial expense 416 458 425 080Depreciation and provisions 3 444 10 019

(419 902) (435 099)

FINANCIAL INCOME (EXPENSE) (219 906) (229 032)

INCOME FROM ORDINARY ACTIVITIES OF THE FULLY CONSOLIDATED COMPANIES 853 363 864 699

Exceptional revenueProvisions written back 250 448 203 217Other revenue 205 718 258 572

456 166 461 789

Exceptional expensesDepreciation and provisions 116 745 110 122Other expense 293 167 331 280

(409 912) (441 402)

EXCEPTIONAL INCOME (EXPENSE) 46 254 20 387Depreciation of goodwill and sundry acquisition differences 20 236 19 582Taxes on income 307 604 239 279

INCOME OF THE FULLY CONSOLIDATED COMPANIES AFTER TAXATION 571 777 626 225Share of income of affiliates 1 882 468

NET INCOME 573 659 626 693of which: attributable to Michelin Group 535 617 591 951

attributable to minority interests 38 042 34 742

(in EUR thousands)


94

1998 1997

OPERATING ACTIVITIESNet income 573 659 626 693Depreciation and amortization 749 904 706 369Writing-down provisions, contingencies and charges (15 893) (2 497)Capital gains (losses) on fixed asset disposals (47 696) (36 083)Other (13 500) (10 531)Operating cash flow 1 246 474 1 283 951Change in inventories, receivables and payables (167 565) 96 397

NET CASH PROVIDED BY OPERATING ACTIVITIES 1 078 909 1 380 348

INVESTING ACTIVITIESAcquisition of tangible and intangible fixed assets (1 173 877) (996 117)

Increase in financial fixed assets (209 251) (147 014)Total (1 383 128) (1 143 131)Disposal of tangible, intangible and financial fixed assets 143 031 180 117Reduction in financial fixed assets 51 143 29 967Total 194 174 210 084Net capital investment in the period (1 188 954) (933 047)Change in inventories, receivables, payables and sundries 20 117 17 803

NET CASH USED IN INVESTING ACTIVITIES (1 168 837) (915 244)

FINANCING ACTIVITIESIncrease in common stock 41 626 692 477Distributions paid in the period (137 129) (112 285)Change in consolidated total (95 503) 580 192Change in financial debt 113 373 (981 325)Change in inventories, receivables and payables (3 591) (14 274)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 14 279 (415 407)Effect of changes in exchange rates and scope of consolidation 3 530 17 141

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (72 119) 66 838Cash and cash equivalents at beginning of period (119 360) (186 198) Cash and cash equivalents at end of period (191 479) (119 360)

Consolidated statement of cash flowsin euros (in EUR thousands)

The consolidated accounts have been prepared in accordance with currentFrench regulations; since last year there has been no change in themethod of consolidation. Changes in the scope of consolidation made nosignificant impact.

PRINCIPLES OF CONSOLIDATION

Basis of consolidation— full consolidation:

Except as stated below, all the industrial, commercial, financial andother companies which Compagnie Générale des ÉtablissementsMichelin controls directly or indirectly.

— consolidated by the equity method:Companies in which Compagnie Générale des ÉtablissementsMichelin holds a direct or indirect interest of between 20% and 50%.

— omitted from consolidation:Companies which are covered by article 357-4 of the law of July 24, 1966.

Accounting policies

1. As a general rule, the accounting periods of the consolidated companiescoincide with the calendar year and the balance sheets and statementsof results used in the consolidation are those submitted for the approvalof their annual meetings. All of the accounts are subject, as necessary,to reclassification to conform to Group accounting policies.

2. The accounts of foreign subsidiaries have been converted into eurosusing:

— the rate of exchange at December 31 for balance sheet accounts,with the exception of Brazil where the currency devaluation ofJanuary 1999 has been taken into account.

— average exchange rates for income statements, except forcountries with strong inflation where the December 31 exchangerate has been used. In total, these are not material.

Appendix to the consolidated financialstatements at December 31, 1998


95

in euros

3. The principal adjustments and restatements made have been to thefollowing:— Inter-Group dividends have been eliminated from the results.— Unrealized profits and losses on exchange are included in the

results, regardless of local rules.— The depreciation of tangible fixed assets of the major Group

companies has been recalculated using consistent asset lives on astraight line basis and applied to original cost, increased wherenecessary as a result of legal revaluations.

— The industrial fixed assets of Michelin (Nigeria) Limited have beenfully depreciated in the consolidated accounts.

— Accounting for leasing contracts is as described later underAccounting Principles.

— Unrealized profits on inventories of finished goods derived frominter-company sales have been eliminated.

— Movements in the financial year concerning either tax-regulatedprovisions or other statutory provisions have been excluded fromthe results. The same principle has been applied to movements inthe provisions for depreciation on investments in the consolidated companies, whether allowable or not for local tax purposes.

— Withholding taxes not recoverable on dividends received fromconsolidated companies have been charged as an expense.

— Acquisition differences have been determined and theiramortization calculated as noted later under AccountingPrinciples.

— The above restatements have given rise, where appropriate, to thecomputation of a provision for deferred taxation corresponding tothe tax position of each company vis-a-vis its local legislation.Provision for tax liability, calculated using the deferred tax method,is made company by company; the balance of taxes recoverable isonly taken into account where it is material and is likely to bereceived in the short or medium term. Variations in deferred taxcharges are recorded in the statement of income.

Changes recorded in the restated headings which have theircounterpart either in the results, the consolidation difference or theprovision for deferred taxation, have been split where appropriatebetween Group and minority interests.

ACCOUNTING PRINCIPLESAND VALUATION OF ASSETS

The consolidated accounts for the year to December 31, 1998 havebeen prepared and presented in conformity with the accounting rulesand with due regard to the principles of prudence, separation ofaccounting years and continuity of trading.The various balance sheet items were computed as follows:


Items shown in the balance sheet under the heading “Intangible FixedAssets” consist mainly of the values of computer software, amortizedover periods of between one and three years, plus some items ofgoodwill, completely written down.

Acquisition differences

On first consolidation of an acquisition the difference consists of theexcess of the cost of the investment over the fair value of the assetsacquired.Differences are capitalized on the first consolidation of industrialcompanies and, after harmonization of the net values of theirproduction facilities in accordance with Group accounting practice, areamortized on a straight-line basis over a period of 20 years. Their assetvalues are examined annually.

Other acquisition differences recorded during an accounting periodare amortized in the year.Negative acquisition differences are shown in the balance sheet as aprovision. Provisions are written back as necessary, reflecting changesin the risk associated with the companies acquired.


Land, buildings and plant are valued at original cost, increased wherenecessary as a result of legal revaluations.Depreciation is calculated on a straight-line basis and the principalasset lives used are:— Buildings: 25 years,— Plant & machinery, fixtures and fittings: 7 to 12 years,— Other tools and equipment: 2 to 12 years.Industrial assets which are subject to long term leasing contracts areshown in the balance sheet at cost and are depreciated in accordancewith Group policy. The corresponding debt is shown as a balancesheet liability.

Stockholdings and other financial investments

Stockholdings in companies consolidatedby the equity methodThe value of stock in companies consolidated by the equity methodrepresents the share of the stockholders’ equity of these companiesheld by the Group, applying the principles of consolidation that havebeen used.

Non-consolidated stockholdings and other financial fixed assetsThe gross value is primarily the cost of acquisition less purchaseexpenses, except in cases where local regulations have requiredrevaluation.The portfolio valuation is at the lower of its quoted value or the valuewhich would result upon consolidation by the equity method. Aprovision for writing down is made where the portfolio value is lessthan recorded value.

Inventories

In general, inventories are valued at weighted average cost or on thefirst in, first out method (FIFO).Finished goods are valued at the lower of cost or market value andwhere necessary, provision is made for depreciation.

Trade receivables and related accounts

Trade receivables are recorded at nominal value, net of a provision fornon-recovery determined either individually or according to agingcriteria.

Suspense and related accounts

Recorded under this heading are mainly:— charges to be spread over several years,— deferred tax assets accounted for locally, as referred to above

under Accounting Policies.

Subordinated debt

Subordinated debt has a predetermined maturity and is subject tospecial conditions concerning the payment of interest andreimbursement of principal. In the event of a dissolution or courtsupervision, it has a ranking inferior to that of all other creditors andits position is similar to that of common stock. In the balance sheet,therefore, subordinated debt is shown immediately followingstockholders’ equity.


96

Registered Equity

1. Ultimate Parent Registered Office Country number interest %

- Compagnie Générale des Établissements Michelin Clermont-Ferrand France 855 200 887

2. Full consolidation

— Industrial companies- Manufacture Française des Pneumatiques Michelin Clermont-Ferrand France 855 200 507 96.07- Société Michelin de Transformation des Gravanches Clermont-Ferrand France 344 181 086 95.79- Société du Caoutchouc Synthétique Michelin Bassens France 328 525 746 96.07- Pneu Laurent Avallon France 425 920 212 96.07- Wolber Soissons France 715 780 540 96.07- Pneumatiques Kléber Laxou France 552 008 831 96.07- Caoutchouc Manufacturé et Plastiques Versailles France 322 804 931 96.07- Kléber Reifen GmbH Saint-Ingbert Germany 93.48- Michelin Reifenwerke KGaA Karlsruhe Germany 93.45- Michelin Kronprinz Werke GmbH Solingen Germany 47.66- Sociedade Michelin de Participações Indústria e Comércio Ltda. Rio de Janeiro Brazil 93.45- Michelin North America (Canada) Inc. New Glasgow Canada 93.45- Michelin ShenYang Light Truck & Passenger Tire Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Rubber Components Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Tire Co., Ltd. Liaoning Province China 84.11- Michelin ShenYang Truck Tire Co., Ltd. Liaoning Province China 65.42- Industria Colombiana de Llantas S.A. Cali Colombia 91.93- Neumáticos Michelin, S.A. Madrid Spain 90.12- Michelin North America, Inc. New York United States 93.45- Michelin Aircraft Tire Corporation Wilmington United States 93.45- American Synthetic Rubber Corporation Wilmington United States 93.45- Taurus Truck Tyre and Trading Ltd. Budapest Hungary 93.39- Taurus Agricultural Tyres Ltd. Nyíregyháza Hungary 93.39- Società per Azioni Michelin Italiana Turin Italy 93.45- Michelin Okamoto Tire Corporation Ohta-City

Gunma-Ken Japan 85.42- Industrias Michelin Mexico D.F. Mexico 93.45- Michelin (Nigeria) Limited Nigeria Nigeria 74.76- MSF Tire & Rubber, Inc. Muntinlupa City Philippines 37.68- Stomil-Olsztyn S.A. Olsztyn Poland 50.33- Michelin Tyre Public Limited Company England United Kingdom 93.45- Michelin Gummiringar AB Stockholm Sweden 93.45- Michelin Siam Co., Ltd. Chonburi Thailand 46.74- Siam Tyre Industry Co., Ltd. Saraburi Province Thailand 46.74- Siam Tyre Phra Pradaeng Co., Ltd. Samuthprakarn Thailand 46.74- The Siam Steel Cord. Co. Bangkok Thailand 46.74

— Commercial companies- Euromaster France Grenoble France 392 527 404 80.66- Société d’Exportation Michelin Clermont-Ferrand France 855 200 317 100.00- Transityre France S.A. Clermont-Ferrand France 387 940 778 93.45- Michelin Tyre Company South Africa (Proprietary) Limited Johannesburg South Africa 93.45- Michelin Reifenverkaufsgesellschaft m.b.H. Vienna Austria 93.45- Michelin Australia Pty. Ltd. Melbourne Australia 93.45- Michelin Belux S.A. Brussels Belgium 93.45- Michelin Chile Ltda. Santiago Chile 93.45- Michelin Korea Co., Ltd. Seoul Korea 93.45- Michelin Gummi Compagni A/S Brøndby Denmark 93.45- Michelin Rehvide AS Tallinn Estonia 93.45- Michelin Retread Technologies, Inc. Wilmington United States 93.45- Oy Suomen Michelin Ab Espoo Finland 93.45- Elastika Michelin A.E. Athens Greece 93.45- Michelin Asia (Hong-Kong) Ltd. Hong Kong Hong Kong 93.45- Michelin Magyarország Kft Budapest Hungary 92.62- Kléber Italiana SpA Volpiano Italy 93.45- Michelin Tire Sales Corporation Tokyo Japan 85.42- Nihon Michelin Tire Co., Ltd. Tokyo Japan 93.45

SCOPE OF CONSOLIDATION


97

Registered EquityRegistered Office Country number interest %

- Michelin Tyre Services Company Ltd. Nigeria Nigeria 56.34- Norsk Michelin Gummi A/S Skedsmo Norway 93.45- Transityre B.V. Breda Netherlands 93.45- Eurodrive Services and Distribution N.V. Amsterdam Netherlands 93.01- Michelin Nederland N.V. Drunen Netherlands 93.45- Michelin Polska Sp. z o.o. Warsaw Poland 93.45- Michelin Companhia Luso-Pneu Ltda. Loures Portugal 93.45- Michelin Ceská republika s.r.o. Prague Czech Republic 93.45- Associated Tyre Specialists Limited England United Kingdom 93.15- Michelin Tyres Russian General Agency ZAO Moscow Russia 93.45- Michelin Asia (Singapore) Co. Pte. Ltd. Singapore Singapore 93.45- Michelin Slovensko s.r.o. Bratislava Slovakia 92.62- Michelin Slovenija Pnevmatike d.o.o. Ljubljana Slovenia 92.62- Société Anonyme des Pneumatiques Michelin Givisiez Switzerland 93.45- Michelin Siam Marketing & Sales Co., Ltd. Bangkok Thailand 46.74- Michelin Lastikleri Ticaret A.S. Istanbul Turkey 93.45- Various distribution companies in Europe

and elsewhere.— Financial and other companies

- Société Européenne de Pneumatiques Clermont-Ferrand France 344 143 680 93.31- Participation et Développement Industriels S.A. Clermont-Ferrand France 301 293 171 99.99- Spika S.A. Clermont-Ferrand France 304 690 209 100.00- Société Civile Immobilière Michelin Clermont-Ferrand France 328 441 050 96.07- Société Civile Immobilière Michelin Breteuil Paris France 328 309 281 96.07- Société des Procédés Industriels Modernes Paris France 300 203 981 96.07- Société de Technologie Michelin Clermont-Ferrand France 414 624 379 100.00- Michelin Investment Holding Company Limited Bermuda Bermuda 93.45- Plantações E. Michelin Ltda. Rio de Janeiro Brazil 93.45- Plantações Michelin da Bahia Ltda. Rio de Janeiro Brazil 93.45- Michelin Americas Research & Development Corporation Wilmington United States 93.45- Michelin Corporation New York United States 93.45- Taurus Rubber Company Ltd. Budapest Hungary 93.39- Osse River Rubber Estates Limited Nigeria Nigeria 38.13- Utagba Uno Rubber Estates Limited Nigeria Nigeria 65.23- Araromi Rubber Estates Limited Nigeria Nigeria 54.39- Waterside Rubber Estates Limited Nigeria Nigeria 74.76- MC Projects B.V. Amsterdam Netherlands 46.73- Michelin Finance (Pays-Bas) B.V. Amsterdam Netherlands 93.45- Michelin Holding (Pays-Bas) B.V. Amsterdam Netherlands 93.45- Michelin Participations B.V. Amsterdam Netherlands 92.62- Société des Matières Premières Tropicales Pte. Ltd. Singapore Singapore 93.45- Compagnie Financière Michelin Granges-Paccot Switzerland 93.45- Michelin Factoring S.A. Granges-Paccot Switzerland 93.45- Michelin Participations S.A. Granges-Paccot Switzerland 92.62- Michelin Recherche et Technique S.A. Granges-Paccot Switzerland 93.45- M.S. Enterprises Holding Co., Ltd. Bangkok Thailand 47.66- Michelin Siam Group Co., Ltd. Bangkok Thailand 46.74

3. Consolidated by the equity method- Compagnie Générale des Transports Verney Asnières France 378 340 061 41.30- Radsystem GmbH Moselle Germany 23.83- Sucat Land Corp. Makati City Philippines 18.84- Tekersan Jant Sanayi A.S. Istanbul Turkey 9.58

4. Companies omitted from consolidation- Various companies which, relatively, were not material, in accordance with the provisions of article 357-4 of the law of July 29, 1966,

concerning trading companies (consolidated accounts).

The above list, which is not exhaustive, has been prepared with specific reference to the requirements of article 248-12, decree no. 67-236 of March 23, 1967, concerning trading companies (consolidated accounts).


98

Depreciation:

Intangible Fixed Assets 145 499 39 809 – 11 521 7 513 181 300


Tangible Fixed Assets 7 230 108 677 406 – 297 573 – 289 526 7 320 415 (1)

7 512 034 736 692 – 309 106 – 290 125 7 649 495

Provision for amortization 224 416 77 778 – 34 827 – 1 295 266 072 (2)

TOTAL 7 736 450 814 470 – 343 933 – 291 420 7 915 567

Intangible Fixed Assets 214 493 73 697 – 13 206 4 874 279 858


Tangible Fixed Assets 11 939 113 1 100 180 – 345 588 – 435 174 12 258 531 (1)

TOTAL 12 553 316 1 179 094 – 358 806 – 451 117 12 922 487





Gross valueat Dec 31

Conversion and sundrydifferences

DiminutionsAdditionsGross valueat Jan 1

Peugeot S.A. (1) Paris 3.5 % 3 264 687 (191 425) 59 980 (2)

Other companies, loans, long,term advances and others 343 740

TOTAL 403 720

(1) Accounting year ended December 31, 1997.

(2) Based on the average quoted price for December 1998 this holding was valued at EUR227 million.

Net value ofholding/loan

at December 31

Last accountingperiod income

(loss)

Stockholders’equity

Proportionof capital held

RegisteredofficeCompany




Other countries 602 350

(2) of which: on financial fixed assets 118 742

on inventories 83 483

on receivables 63 847

Balanceat Dec 31


Amounts writtenback in the

financial year

Provisionsin the

financial year

Balanceat Jan 1

3) FINANCIAL FIXED ASSETS

2) DEPRECIATION AND PROVISIONS

(in EUR thousands)

NOTESin euros

1) FIXED ASSETS


99

(in EUR thousands)

5) SUMMARY OF STOCKHOLDERS’ EQUITY AND MINORITY INTERESTS

6) SUBORDINATED DEBT

Capital stock 250 430 1 506 251 936

Paid in excess of par 1 699 026 40 019 1 739 045

Consolidated reserves 1 692 706 65 467 747 – 3 691 2 156 827

Consolidation translation

adjustments – 569 227 – 211 888 – 781 115

Statement of income,

Group share 591 951 – 124 204 – 467 747 535 617 535 617

Stockholders’ equity 3 664 886 41 590 – 124 204 — – 215 579 535 617 3 902 310

Minority interests:

in Stockholders’ equity 255 166 36 21 817 – 9 767 267 252

in Net income 34 742 – 12 925 – 21 817 38 042 38 042

TOTAL 3 954 794 41 626 – 137 129 — – 225 346 573 659 4 207 604

Balanceat Dec 311998 result


Allocationof balanceof retained

earningsDistributionsIncreases

in capitalBalanceat Jan1

This is a borrowing of USD1.1 billion for a term of 15 years, maturing in May 2005. Interest is normally due quarterly and other special conditionsattached to this borrowing are noted under Accounting Principles.It was decided, within the terms of the contract, to limit the amount of subordinated debt at December 31, 1998 to USD951 million.

Banque Industrielle et Mobilière Privée 25 238 – 25 238 (1) —

Compagnie Générale des Transports Verney 6 275 1 328 7 603

Radsystem GmbH 906 – 351 555

Motor Tyre Services Public Limited Company 739 – 739 (2) —

Sucat Land Corp. 2 964 12 2 976

Tekersan Jant Sanayi A.S. 1 333 45 1 378

37 455 – 24 943 12 512

Other companies 1 064 7 1 071

TOTAL 38 519 – 24 936 13 583

Net valueof holding at Dec 1

Changesduring the year

Net valueof holding at Jan 1Company

(1) Holding sold in 1998 (2) Became majority interest in 1998

Other changes arose mainly from the financial results of the companies and dividends distributed in respect of the 1997 financial year.

in euros4) STOCKHOLDINGS CONSOLIDATED BY THE EQUITY METHOD


100

(in EUR thousands)

31.12.1998 31.12.1997

Provision for losses on foreign exchange 1 600 3 001Provision for pensions and similar obligations 1 463 697 1 499 694Provision for deferred taxation 54 629 52 679Provision for restructuring costs 201 831 290 443Provision for other risks and expense 172 481 285 547

TOTAL 1 894 238 2 131 364

Tax losses carried forward and not taken into account in the calculation of deferred tax assets or in the charge for deferred tax amounted to EUR1.3 billion.

Setting aside the effect of consolidation translation adjustments andsundry items which amounted to EUR4.1 million, the change in theprovision for restructuring costs was due to:

• a writing back of provisions which had been allocated to 1998 for anamount of EUR92.4 million;

• other provisions and write-backs for a net provision of EUR7.9 million.

For the most part, the above changes are included in the exceptional result.

Convertible bonds 18 18 — —

Other bonds 490 243 185 345 — 304 898

Sundry borrowings and financial debt 2 552 285 1 591 305 851 313 109 667

TOTAL FINANCIAL DEBT 3 042 546 1 776 668 851 313 414 565

Accounts payable - trade and similar 1 312 936 1 312 816 120 —

Other debts 1 447 426 1 376 329 70 011 1 086

TOTAL (1) 5 802 908 4 465 813 921 444 415 651

(1) of which secured, 109 160

Falling due after1 and within

5 years

Falling dueafter 5 years

Falling duewithin 1 yearGross amount

10) POSTRETIREMENT INDEMNITIES AND SIMILAR LIABILITIES

In most of the countries in which the Group companies operate, commit-ments in respect of postretirement benefits are covered:

- by external organizations to whom employee and company contributionsare paid. This releases the companies from any further liability in thisregard, or

- by pension funds, which may be managed either externally or byemployees of the companies concerned. In these cases, the commitmentis generally limited to ensuring adequacy of funding and propermanagement of the funds.

Supplementary postretirement commitments, either for pensions or partialcoverage of medical expenses not met by external organizations, are of acontractual nature and, in conformity with the accounting requirements ofthe countries concerned, an actuarial provision of EUR1.5 billion is madein the balance sheet.

Additionally, according to the rules and conventions existing in the variouscountries, employees may, upon leaving the company, receive a capital sumand/or a series of annuities. The actuarial value of these commitments notcovered by the provisions mentioned above is estimated at EUR0.4 billion.

Michelin North America Inc., New York, commenced a program of the saleand securitization of certain accounts receivable in 1994. This revolving program provides a long-term source of finance.

At December 31, 1998 the net sales of accounts receivable were USD610 million. Expenses related to the program are calculated and paidbased on readily-available market rate indices and are included as financialexpenses in the accounts.

8) DEBT

9) ACCOUNTS RECEIVABLE

in euros7) PROVISIONS FOR CONTINGENCIES AND EXPENSES


101

(in EUR thousands)

12) NET SALES

13) EMPLOYEES AND PERSONNEL EXPENSE

14) FINANCIAL INCOME AND EXPENSE - MARKET EXPOSURE

Commitments undertaken

Guarantees 162 608

Finance leases 623 215

Bills discounted not yet due 1 057

TOTAL 786 880

Commitments received

Guarantees and sureties 304 042

France 15.5

Western Europe excluding France 38.0

North America and Mexico 31.4

Other countries 15.1

Tires and wheels 98.7

Manufactured rubber and plastics,

maps, guides and sundries 1.3

Geographical zone % Allocation by activity %

The average number of employees in companies within the fullconsolidation was 127,241.

Corresponding personnel expense was EUR4,359 million.

Foreign exchange risks

Group policy is to cover foreign exchange exposure. As a result, variousmarket instruments are used, mainly exchange rate forward contracts oroptions. All of the related expenses, chiefly commissions paid, areaccounted for on completion of the transactions concerned.

In general, receivables and payables in currency are of a similar nature andterm. There is thus an offset and only the net exposure is covered.

The resulting income and losses, realized or unrealized, together with thecosts of coverage are recorded in the income statement.

In summary, all net risks of loss are covered by provisions.

Investments by holding companies in foreign affiliates is financed in thecurrency of the holding company’s accounts (unless a sale of theinvestment is foreseen) and the exchange exposure arising on income fromthe holdings is covered according to the above procedure.

Interest rate risks

Interest rate exposure for periods of up to one year is managed locally. A maximum amount to be financed at fixed rates for more than one yearis set for each foreign currency and exposure is controlled and coordinatedconsistently within the Group.

At December 31, 1998, net financial debt included, (in EUR millions):

- borrowings and financial debtss 3 043

- stocks, shares and securities – 283

- cash and cash equivalents – 816

1 944

- subordinated debt 808

TOTAL 2 752

in euros11) OTHER COMMITMENTS


102

The table below gives a summary of net financial debt, fixed and variable rate and by currency, after accounting for the results of all financial operationsusing market instruments.

French franc – 198 306 6.8 108 3.9

Swiss franc 76 68 4.8 144 5.2

Deutschmark 185 5 3.8 190 6.9

Peseta 81 — — 81 2.9

Italian lira 186 — — 186 6.8

Pound sterling 325 — — 325 11.8

Other West European 31 3 2.0 34 1.3

Total European 686 382 6.4 1 068 38.8

US dollar 450 802 3.5 1 252 45.5

Canadian dollar 29 23 7.0 52 1.9

Total dollar zone 479 825 3.6 1 304 47.4

Other currencies 370 10 2.0 380 13.8

TOTAL 1 535 1 217 4.4 2 752 100.0

Variable rate Fixed rate Average fixedrate period Total debt % per

currencyCurrency

Risks on financial holdings

The value of non-consolidated long-term stockholdings arises both from their utility to the Group and from their potential realizable value. At December 31, 1998 there was no foreseeable risk of depreciation.

Other financial holdings are included in the balance sheet for a total ofEUR282.6 million. They consist mainly of short-term investments with no

associated exchange or interest rate risk. Of this amount, quoted sharesaccounted for EUR49 million and their stock exchange value at December 31, 1998 was EUR52 million.

15) OTHER EXCEPTIONAL REVENUE AND EXPENSES

Other exceptional revenue 205 718of which: proceeds from disposals of fixed assets 137 165

Other exceptional expense 293 167of which: net value of disposals of fixed assets 89 468

restructuring costs (excluding provisions) 100 126

16) TAXES ON INCOME

The charge in the statement of income is made up: - Tax relating to the accounting year 258 414- Deferred tax 49 190

17) MANAGEMENT COMPENSATION

The Company is administered by Gérants ( Managing Partners) who are also Associés commandités (General Partners). In this latter capacity they benefitfrom a global allocation of income as prescribed by the Articles and shared between all of the General Partners. The Managing Partners do not otherwisereceive salary or benefits in kind from Company Générale or from companies which it controls.

(in EUR millions)

(in EUR thousands)

(in EUR thousands)

in euros

Photos : © MICHELIN - © MICHELIN / Grelet - © DPPI

SIMAN

103

This document is a translation.The original, which is in French, is the authoritative version.

rapport 1998 anglaispassenger tire co. ltd (china) msf tire and rubber, inc. (philippines) michelin...

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