Bridgestone marks 25th anniversary of Firestone 'merger'

AKRON (Sept. 11, 2013) — It's been 25 years since Japan's Bridgestone Corp. purchased Firestone Tire & Rubber Co., but "acquisition" is a term those in Bridgestone circles don't like to use.

They much prefer the term "merger," according to Christine Karbowiak, an executive vice president of Bridgestone Americas Inc., who serves as chief administrative officer and chief risk officer of the Nashville-based subsidiary of the world's largest tire maker.

To the outside world the $2.6 billion deal in May 1988 was seen as an acquisition.

Bridgestone originally sought to create a joint venture with Firestone covering just the firms' tire businesses but was forced to double its offer to $80 a share for all of Firestone in a bid to fend off an unsolicited takeover offer from Pirelli S.p.A. and Group Michelin.

But Ms. Karbowiak — who joined the company in 1992, three years after the agreement was struck — said "merger" more accurately portrays what the firms have tried to accomplish in putting the two tire and rubber product firms together.

"Merger implies more of the idea that you come together and you share the best of each, as opposed to an acquisition that is kind of an imposition of one culture on the other," she said.

The genesis for the deal goes back years prior to 1988, she said. The industry had evolved from the radialization of the tire sector in Europe in the 1960s and North America in the 1970s. That required a steep investment on behalf of the industry to shift manufacturing to radial from bias.

"Frankly, Firestone was not in a position to take that step," Ms. Karbowiak said, "and that, combined with some other difficulties that it ran into, kind of put it in a challenging position."

Bridgestone faced a dilemma of its own. The tire business in the 1980s was consolidating steadily, with some smaller players joining with larger ones in order to invest in new technologies.

Bridgestone at that time was a well-respected high-tech company that was considered a strong regional player with strong management and a strong balance sheet, but it didn't have an iconic name such as Firestone and it lacked the U.S. firm's global reach.

Being a moderately sized business with the attributes of Bridgestone in a globalizing environment — Bridgestone had edged past Firestone in terms of sales just two year earlier — also made the Tokyo-based company a prime acquisition target itself.

"You combine that fact with the vision that Bridgestone had to become a global player, and it was clear that some sort of alliance with another industry player was critical," Ms. Karbowiak said. "You needed to create that global footprint, and you can't do it organically fast enough to protect yourself."

So a deal with Firestone became the focus. The firms shared little overlap as far as where facilities were located. Bridgestone was strong in Asia, but not so much in the Americas or Europe, where Firestone was firmly entrenched.

On May 5, 1988, the deal was closed, and Bridgestone had taken a giant first step in its globalization efforts.

Current Bridgestone Corp. CEO Maasaki Tsuya refers to the 1988 marriage with Firestone as the Japanese company's "second foundation," the first being when Shojiro Ishibashi established the firm in 1931.

Similar core philosophy

To Ms. Karbowiak, the reason the Bridgestone-Firestone combination has succeeded where other high-profile mergers and acquisitions have failed goes back to what the founders of the companies believed.

Harvey Firestone's mantra — "The best today, still better tomorrow." — was coupled with a commitment to community involvement.

Similarly, she said Mr. Ishibashi's philosophy was that a company focused only on profit is never going to survive long term. To achieve that sustainability, a company must focus on the community in additon to earnings.

Some years ago, that mission was articulated in Bridgestone's motto, "Serving society with superior quality."

"That's the mission that we as a global organization live by today," Ms. Karbowiak said. "You go back to these two founders, and at the heart, these organizations were not dissimilar."

That's not to say that merging Bridgestone and Firestone was easy. Melding two different management styles and deciding how to optimize use of the manufacturing operations were but two issues that had to be resolved.

Then there were such seemingly small details as the differences in naming products and harmonizing code numbers.

"That all takes time and effort and energy," she said. "The languages were different. You have to get over how you are going to communicate. You didn't have instant messaging back then, and you had to create those lines of communication and develop a partnership that really creates the ability to collaborate."

There were also difficulties faced in the Americas that the North American organization was able to overcome because of the stability of the worldwide Bridgestone business.

Chief among those was the long-running labor war, first with the United Rubber Workers union, and then with the United Steelworkers, along with the Ford Explorer/Firestone Wilderness recall early in 2000.

"When one part of the organization may be facing challenges, the other side can support it and provide shareholder value in return," Ms. Karbowiak said.

Going global

Bridgestone has made great strides in the past quarter century toward being a global organization, but still is striving to achieve true globalization. One example of the steps made in this area is the $1 billion acquisition of Bandag Inc. in 2007 to offer trucking customers cradle-to-grave service for new truck tires along with retreading services.

That concept, originally strongest in the Americas, is now being adopted worldwide by Bridgestone.

"That's globalizing — that's not just being international," Ms. Karbowiak said. Mr. Tsuya also is focused on ways Bridgestone can optimize operations around the world. That includes creating opportunities for conversation among senior managers across the globe.

Ms. Karbowiak said that most times multinationals tend to look to their home country operations when filling top leadership posts, but many of the executive officers of the parent company aren't Japanese.

Gary Garfield, Bridgestone Americas president and CEO, along with Eduardo Minardi, Bridgestone Americas chief operating officer, are vice presidents and senior officers of Bridgestone Corp. Ms. Karbowiak herself is a vice president and officer of Bridgestone Corp.

Conversely, while the past three leaders of Bridgestone Americas — Mr. Garfield, preceded by Mark Emkes and John Lampe — have been American, a number of Japanese officials serve in key roles with the subsidiary as well.

"Step by step, the thought is expanding into a globalized footprint, but we still have work to do," she said. "The needs of the market keep changing. The globalized response will have to keep changing. Once you have the infrastructure in place to respond on a global basis, it makes it easier. But it's a job that's never done."

Tire industry's top dog

Bridgestone has earned the mantle as the world's top tire maker five years in a row, with its $28.6 billion in 2012 tire sales, besting No. 2 Michelin by more than $2 billion. But it's a title that means more than just numbers, according to Ms. Karbowiak.

"We need to be the world's No. 1 not just in name, but in reality," she said. "It means behaving like the world's No. 1 and being recognized for being the world's No. 1 because of our technology. It is a goal of ours we continue to work toward."

One way Bridgestone is doing that is embracing the concept of "Dan-Totsu," meaning it wants to be identified as the "clear and absolute leader" in all of its industries.

"That is a concept that we as a global organization are embracing and working toward," she said. "Everything we do moves in that direction. It means focusing on the end user as well as our customers in order to ensure we are providing them the kind of experience that they need today and will need in the future."

It forces Bridgestone to go against the tire industry norm of looking inward, Ms. Karbowiak said, and to understand more broadly what's going on in the world and what the firm needs to do to bring those sensibilities to its business.

"The change, the movement, the positive direction is very enterprising," she said. "It's great to be part of an organization that is taking that kind of leadership role and is moving forward."

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Bruce Meyer is managing editor of Rubber & Plastics News, where this article first appeared.