Michelin shares dropped as much as 3.1 percent and fell 75 euro cents, or 1.5 percent, to 50.75 euros at 4:15 p.m. in Paris after the US Grand Prix where only 6 cars raced, from 3 teams that were not using Michelin tyres.
All that were left on the track was Ferrari, Minardi and Jordan. I suppose because none of the other good teams competed, this helped Ferrari’s Michael Schumacher get his first win this season. But he wasn’t very thrilled about it, he did not even spray the customary victory champagne at the podium.
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Michelin Shares Fall After Cars Quit U.S. Grand Prix (Update5)
June 20 (Bloomberg) — Shares of Michelin & Cie, the world’s largest tiremaker, fell more than 3 percent after Formula One cars using the company’s tires pulled out of the U.S. Grand Prix at Indianapolis Motor Speedway on safety concerns.
Seven teams, accounting for 14 of the 20 cars in the world’s most popular racing series, withdrew, leaving six drivers using rival Bridgestone Corp. tires in the race yesterday.
“Considering all of the investment and the company’s image in the U.S., there will be consequences to sales,” said Salah Seddik, a fund manager at Richelieu Finance in Paris, which manages about $2.2 billion of equities.
Michelin, which generates a third of its sales in North America, told the seven teams not to participate in the event, the only U.S. stop on the Formula One circuit, because it couldn’t determine the cause of tire failures that led to two crashes during practice earlier in the month. The tires, being used for the first time this year, have had unexplained drops in pressure.
“It was a fiasco, but we don’t regret the decision,” Frederic Henri Biabaud, deputy director for Clermont-Ferrand, France-based Michelin’s racing-related operations, said in an interview. “We couldn’t have risked the possibility of an accident.”
Michelin shares dropped as much as 3.1 percent and fell 75 euro cents, or 1.5 percent, to 50.75 euros at 4:15 p.m. in Paris.
Formula One championship points leader Fernando Alonso and Kimi Raikkonen, who’s second in the standings, dropped out. Michael Schumacher won his 84th career race and the first this season.
Fans booed and threw debris when Schumacher entered victory lane. Some held up hand-written signs saying, “Money Back.” Schumacher, the seven-time Formula One champion, didn’t spray champagne as is customary for the race winner.
Formula One has had a hard time winning over U.S. fans who favor Nascar stock-car racing to the open-wheel series. Many drivers and team owners expressed concern that yesterday’s race wouldn’t help them attract new fans.
“It’s the worst possible advert for Formula One,” Nick Fry, chief executive of the BAR-Honda team, said in a statement. “We all wanted to race, that’s what we came here to do.”
The International Automobile Federation, known by its French acronym FIA, told teams yesterday they would have to compete with original Michelin tires as required by the rules rather than switch to new models shipped in overnight. It said the drivers would have to go slower through a high-speed turn where the practice crashes occurred.
The FIA sent a letter to Michelin two weeks ago urging the company to not sacrifice safety for performance after the suspension on Raikkonen’s McLaren car failed at the European Grand Prix in Nurburgring, Germany. Damage to the right-front Michelin tire caused the problem. Michelin’s failure to bring a backup tire to Indianapolis may prompt the FIA to sanction the company, the U.K.’s Guardian newspaper reported.
Max Mosley, president of the sport’s governing body, last week set out his proposed rules for the sport from 2008, including using a single tire supplier for the series.
North America accounted for a third of Michelin’s 2004 sales of 15.7 billion euros ($19.2 billion). The company makes Michelin, B.F. Goodrich, Uniroyal and Kleber tires.
“We are totally aware that the USA is an important market for Formula One,” the Michelin teams said in a joint statement yesterday. “It is sad that we couldn’t showcase Formula One in the manner we would have liked.”
Michelin quit Formula One in 1984, citing a recession in the global tire industry. Attracted by the sport’s increased worldwide television audiences, the company announced its return to the grand prix circuit in December 1999. Formula One this year halved its viewing audience estimate to 150 million people a race because of a drop in European viewers. U.S. TV audiences last year were as low as 244,000 on Speed Channel, a cable TV station, according to BusinessF1 magazine.
Formula One cars, which have top speeds of over 200 miles an hour, use special tires that are built to be lightweight and strong and to last only about 120 miles.