Treading water isn't an option in the rubber business. A company grows or it declines. But it better be ``quality'' growth-in other words, profitable-or disaster awaits, especially for suppliers to automotive manufacturers.
Such are the stories of Hitachi Cable Ltd. and Johnson Rubber Co. One built market share slowly, the other grabbed for the brass ring and missed.
Hitachi shows how measured growth makes sense. The Japanese company's brake hose business in North America stood at about 22 percent of the market in 2007, via a decidedly patient approach. Over the years the company made it a point not to buy business just to gain market share.
A big supplier to Japanese auto OEMs, including their transplants in North America, Hitachi wanted to expand its business with the three U.S. auto makers. And when Ford asked the company to take on substantial volume, Hitachi officials knew they couldn't satisfy the request without buying an existing firm.
So before Hitachi bought Coupled Products L.L.C., company officials took their time analyzing the opportunity, knowing it was a risk despite the chance to boost its North American share to 40 percent. In the end, Hitachi decided to take the leap, but only because it was confident its firm could make the business profitable.
Now turn to Johnson Rubber, the saddest story of the day.
More than 100 years old, Johnson Rubber is one of the best known of the smaller, Midwest component suppliers to the auto makers. You know the type-family owned for many years, a good reputation in the industry and completely under siege by all that plagues auto industry vendors.
The auto OEMs, particularly the Detroit bunch, have made it hell for their suppliers for decades, with policies and pricing that make it hard to survive. But the volume of the business with the auto makers can be huge and enticing to the component manufacturers.
Whatever the truth of the matter-and it's a multisided story, with fingers pointed in many directions-Johnson took on high-volume automotive business that proved unprofitable. Today the owners, 500 employees and creditors are paying the price, as the company shuts down for good April 23.
Once fairly diversified, Johnson ended its days with 80 percent of its revenue tied to automotive. And the business volume that ultimately proved to be Johnson's demise? It has been divided among the company's competitors.