Bridgestone celebrates Firestone anniversary

NASHVILLE, Tenn.—It's been 25 years since Japan's Bridgestone Corp. purchased Firestone for $2.6 billion, 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.

The deal to the outside world was seen as an acquisition—an original joint venture proposal was scrapped when Bridgestone offered $80 a share for Firestone to fend off a bid from Pirelli and Michelin. But Karbowiak said the word 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," said Karbowiak, who joined the company in 1992, three years after the agreement was struck.

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, which followed to the U.S. in the 1970s. That required a steep investment on behalf of the industry to shift manufacturing from bias to radial.

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

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

The Japanese firm was a high-tech, well-respected company. It was a strong regional player with strong management and a strong balance sheet. But it didn't have the iconic name as Firestone, and it lacked the U.S. firm's global reach.

When you are a moderately sized business with the attributes of Bridgestone in a globalizing environment, that also made it 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," 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 North America. 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 founded the firm in 1931.

Similar core philosophy

To Karbowiak, the reason the Bridgestone and 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 operated with the mantra, "The best today, still better tomorrow," and he was extremely committed to community involvement.

Similarly, she said 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 not only focus just on earnings, but also on the community. 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," 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 best 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 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," Karbowiak said.

Going global

Bridge¬stone 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 acquisition of Bandag to offer trucking customers cradle-to-grave service for new truck tires along with retreading services. That was a concept pushed in the Americas but now has been adopted worldwide by Bridgestone.

"That's globalizing—that's not just being international," Karbowiak said.

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.

Karbowiak said that most times mul¬tinationals 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. Karbowiak herself is a vice president and officer of Bridgestone Corp.

Conversely, while the past three leaders of Bridgestone Americas—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 taken 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 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, 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."