AKRON (Nov. 10, 2008) — It looks like two Japanese tire makers are going to bed together. Rather than snicker, be advised this could have some serious ramifications.
Tokyo-based Bridgestone Corp. and Toyo Tire & Rubber Co. have agreed to work together on advanced production methods and joint purchasing of raw materials and equipment.
They also have decided to make tires for each other, with Toyo's U.S. plant in White, Ga., and Bridgestone's Latin American factories in the mix.
The competitors—and be assured, they still are competitors—cemented the deal in a stock issue exchange, giving minority ownership in each other.
I'm not a fan of big company combinations. As a human being, rather than, say, an accountant (here come the letters!), I don't like the massive elimination of factories and people that typically accompanies major acquisitions or mergers.
Yes, I do understand why it is done and the need to reach the Nirvana of productivity. I don't have to like it, though.
This particular joining of Japanese foes, however, is more benevolent than a huge merger deal and has a sense of prescience about it.
Each tire manufacturer has its own acronym-friendly advanced manufacturing process: BIRD—Bridgestone Innovative & Rational Development—for Bridgestone; ATOM— Advanced Tire Operation Module—for Toyo.
Access to each other's systems via licensing might net some interesting innovations.
On the raw material and equipment purchasing side, suppliers to the tire makers can't be all that happy about the deal. Together the tire makers will have more leverage, and you can be sure they'll use it.
Score another for the manufacturers' deal.
And while off-take agreements are nothing new, Bridgestone, the world's second largest tire maker, and Toyo, at No. 11, should achieve cost and access gains in some areas via that part of the pact.
Tire manufacturers have worked together in some areas over the years—creating standards, opposing and/or working with regulators, with various technical agreements.
Still, cooperation between or among the players generally is trumped by fears of antitrust rules and the companies' rabid competitive streak.
The way the world is shrinking, though, makes it highly likely this Japanese model may be the coming thing in the tire world.
Ed Noga is the editor of Rubber & Plastics News, a sister publication of Tire Business.