TOKYO—A quarter century ago, the trend of foreign companies buying U.S. tire manufacturers hit its zenith.
The date: Feb. 16, 1988. The deal: Bridgestone offered to buy a controlling interest in Firestone Tire & Rubber Co. for $1.25 billion. The announcement sent shock waves through the markets.
For much of its history, Bridgestone, whose roots trace back to the early 1930s, had been the dominant player in Asia. However, the firm had no manufacturing presence in Europe and only one medium-sized plant in North America: a truck tire factory in La Vergne, Tenn., that it had acquired from Firestone.
The deal would give the Japanese tire maker another 19 tire plants on five continents. No longer would Bridgestone be just another second tier manufacturer in the global tire industry, but a competitor with the two giants that led the field, Goodyear and Michelin.
Any celebration in Tokyo was premature. Three weeks later, Pirelli S.p.A. and Michelin moved to block the bid, jointly mounting an unsolicited $58 a share offer, worth $1.9 billion. The companies wanted all of Firestone, including its North American tire retail operation and nontire business, primarily synthetic rubber and roofing materials.
Most analysts concluded the bidding was over. Bridgestone would be shut out of the European market, where it would have picked up six plants, and have just one, rather than six, tire factories in North America.
Bridgestone did the unexpected on March 18: It made a then-Japanese record $2.6 billion, $80 per share offer for all of Firestone, both tire and nontire businesses, including 1,500 automotive service centers and 27 plants.
Firestone's shares were going for $35.75 before Bridgestone made its initial offer.
The Securities & Exchange Commission approved the acquisition on May 5. Early in 1990, Bridgestone merged its existing U.S. operation with Firestone to become Bridgestone/Firestone Inc., and separated Firestone's European operation, creating Bridgestone/Firestone Europe L.L.C.
Not clear sailing
The difficulties overcome in acquiring Firestone were a portent for other problems Bridgestone would face with its new operations.
In May 1988, just days before the SEC approved the purchase, General Motors Corp. dropped Firestone as a supplier, except for the Saturn project, where Firestone just had been named exclusive provider of tires.
Bridgestone soon learned many of the plants it had acquired were in worse condition than anticipated. Firestone Chairman John Nevin had refused to let prospective buyers in for a look. Before year's end, Bridgestone committed another $1.5 billion to upgrade and modernize Firestone's North American and European plants.
The Japanese company also took a hit in earnings because of the acquisition. In spring 1989, Firestone's addition dragged down the companies profits by 76 percent to a seven-year low of $107 million. Income continued to decline in 1989—and the firm would have been in the red if it hadn't sold a tract of land west of Tokyo for $333 million.
In North America and Europe, the former Firestone operations ran up net losses of $1.2 billion over a 41/2-year period through fiscal 1992. The bleeding finally stopped in 1993.