Supply hurdles bring Michelin’s Russian operations to a halt

© Reuters. FILE PHOTO: The logo of French tyre maker Michelin is seen on a Formula E racing car during a news conference to present the partnership between Enel Group and FIA Formula E Championship at the MAXXI National Museum in Rome, Italy May 17, 2016. REUTERS

(Reuters) -French tyre maker Michelin (PA:MICP) is suspending its industrial activity in Russia and exports to the country due to supply difficulties following Moscow’s invasion of Ukraine.

In 2004, Michelin became the first international tyre company to open its own production in Russia, with sales in the country currently representing 2% of the group’s total and 1% of its global passenger car tyre production, Michelin said in a statement.

The group’s only plant in Russia, Davydovo, repairs truck tyres and produces up to 2 million new car tyres per year, mainly for the Russian market and some Northern European countries.

“The plant was already working at a very low level since several days. There is a lot of supply difficulties – which means we have disruption of financial flows, and there’s a problem of currency instability,” the company’s spokesperson told Reuters.

Michelin was looking for alternative supply sources in Asia and the Middle East, the spokesperson said, adding the group would continue to pay the wages of the more than 1,000 people it employs in Russia, including 750 at the Davydovo plant.

It had stopped sales of plane tyres and mining tyres following U.S. sanctions, before halting exports completely on Tuesday.