Bridgestone
Corporate History & Strategy

Shojiro Ishibashi, founder of Nippon Tabi Co., Ltd., obtained an exclusive patent for rubber-sole adhesion on tabi shoes in 1918, and subsequently expanded into rubber shoes in 1923. However, Ishibashi foresaw that growth in footwear would plateau and began exploring new businesses that could leverage rubber technology. In 1929, when there were only 40,000 to 50,000 automobiles in Japan, he envisioned the future proliferation of automobiles and focused on domestically producing automobile tires.

The prewar domestic tire market was primarily centered on replacement tires, dependent on domestic production by British Dunlop (now Sumitomo Dunlop) and imports from the United States. Imported tires were priced in the range of 100 yen per unit, which was expensive, and Ishibashi concluded that cost reduction through domestic production was feasible. However, mass production of automobile tires posed high technical challenges, and some domestic manufacturers that had entered the market earlier had gone bankrupt. Despite opposition from those around him, Ishibashi consulted with Dr. Kimijima of Kyushu University and decided to proceed.

In 1930, a prototype automobile tire was completed, and the prospect of mass production became viable. The rubber processing and adhesion techniques cultivated through tabi shoe manufacturing proved applicable to the tire production process, forming the technological foundation.

In March 1931, Bridgestone Tire Co., Ltd. was established in Kurume City, Fukuoka Prefecture, with investment from the Ishibashi family, centered on Shojiro Ishibashi. The founding location was in the same city of Kurume as the parent company, Nippon Tabi. The katakana company name was adopted with the intention of using an English name rather than a Japanese one for future export purposes, as a Japanese name might evoke an image of low quality. Since "Stone Bridge" (a literal translation of Ishibashi) had an awkward ring, the word order was reversed to create "Bridgestone."

Mass production of automobile tires required substantial capital investment, and it was a high-risk venture with prior bankruptcy cases. Ishibashi adopted the capital strategy of establishing the tire business as a separate company rather than as an internal division of Nippon Tabi to diversify risk. As a result, Bridgestone was managed as a privately held family enterprise with 100% of shares owned by the Ishibashi family.

Being managed as a privately held owner-operated company for 30 years allowed the Ishibashi family to monopolize the shareholder profits from the tire business, accumulating such wealth that they ranked first in Japan in wealth tax payment declarations. This capital strategy created the financial structure that funded the family's entry into political and business circles, as well as cultural activities such as operating the Bridgestone Museum of Art.

The founding of Bridgestone coincided with the emergence of domestic automobile manufacturers. Throughout the 1930s, Toyota Motor and Nissan Motor were successively established, and domestic demand for tires expanded alongside the domestic production of automobiles. Bridgestone built up its supply capacity by expanding the Kurume factory and established its position as a domestic tire manufacturer.

During wartime, the company produced aircraft tires and military truck tires in response to military requests, with up to 5,000 workers (including student mobilization) engaged in production at peak wartime operations. To meet postwar motorization, the company established the Tokyo Factory in 1960, securing a domestic tire market share of 46% and claiming the top position by 1962.

The tire business, which originated from tabi shoe rubber technology, expanded by riding the growth of the automobile industry. The Ishibashi family's management was maintained for 30 years until the stock listing in 1961. The capital strategy of spinning off the tire business from Nippon Tabi as a separate company simultaneously achieved Bridgestone's management independence and the concentration of wealth within the Ishibashi family.

From the latter half of the 1950s, the Japanese economy entered a period of high growth, and the number of automobiles in use surged. Tire demand expanded rapidly, and the existing factory in Kurume City, Fukuoka Prefecture, could no longer keep pace with supply. Bridgestone planned to mass-produce tires in the Tokyo metropolitan area and acquired 57,000 square meters of factory land (the former Army Supply Depot site) in Kodaira Town on the outskirts of Tokyo in 1957. The location was decided in part due to the town mayor's enthusiastic efforts to attract the investment.

Construction of Phase 1 commenced in 1958 and was completed in January 1960. Phase 1 operations increased Bridgestone's tire production volume by 30%. In response to demand growth exceeding expectations, the plan was accelerated, and Phase 2 construction began in early 1961, with completion in November of that year.

The combined investment for Phase 1 and Phase 2 reached 8.8 billion yen, far exceeding Bridgestone's paid-in capital of 2.5 billion yen at the time. Financing was primarily sourced from long-term borrowings from institutions including the Long-Term Credit Bank of Japan, with approximately 9 billion yen borrowed in total. To prevent a deterioration in the equity ratio, the company carried out a stock listing in 1961 and doubled its capital through a capital increase, raising paid-in capital to 8 billion yen. Securing construction funds for the Tokyo Factory was a factor that prompted the transition from the Ishibashi family's private management to a publicly listed company.

For the rapid ramp-up of production lines, approximately 800 employees were transferred from the Kurume factory to the Tokyo factory. This was a large-scale personnel transfer requiring relocation from the familiar Kyushu region to Tokyo, where they had no local ties, imposing a significant burden on Bridgestone from a human resources perspective as well.

The operation of the Tokyo Factory significantly bolstered Bridgestone's capacity to supply tires to domestic automobile manufacturers. By 1962, the company secured approximately 46% of the domestic tire production market share, surpassing Yokohama Rubber and Sumitomo Dunlop to become Japan's leading tire manufacturer. Shojiro Ishibashi wrote, 'Achieving a market share of 46% is something that should be specially noted in our company's history.'

The decision to invest more than three times the paid-in capital and to go public was an essential condition for capturing the tire demand of the high-growth period. The transformation from a family-run enterprise in Kurume to a listed company with a large factory in the Tokyo metropolitan area proceeded irreversibly, with the construction of the Tokyo Factory as the catalyst.

In January 1988, Bridgestone announced a plan to acquire 75% of Firestone's shares for $750 million and enter the U.S. market through a joint venture. However, the situation changed dramatically when Italian tire manufacturer Pirelli announced a bid to acquire Firestone at $58 per share. Bridgestone shifted its strategy from a joint venture to full subsidiary acquisition and offered $80 per share, a level at which Pirelli was expected to be financially unable to compete.

As a result, the total acquisition cost reached $2.6 billion (approximately 340 billion yen), ballooning to more than three times the original joint venture plan of $750 million. President Akira Ieiri stated that he wanted to 'avoid a drawn-out bidding war' and followed his advisor's counsel to 'go for a single decisive bid,' choosing a price designed to end the bidding immediately. The basis for the acquisition price was not Firestone's asset value but rather a strategic pricing designed to eliminate competition.

However, had this acquisition not materialized, Firestone could have been acquired by Michelin or Pirelli, and Bridgestone might never again have had the opportunity to secure large-scale production and sales bases in Western markets. Chairman Eguchi later reflected, 'Bridgestone would never have had another chance to internationalize.'

Immediately after the acquisition was completed, in May 1988, GM announced its intention to terminate its supply contract with Firestone by 1990. While the backlash against a Japanese company acquiring a U.S. manufacturer is presumed to have been a factor, the loss of a major customer directly impacted Firestone's post-acquisition performance. In the fiscal year ending December 1990, Firestone recorded a deficit of $350 million, a situation described as 'losses of $1 million per day.'

Furthermore, a problem that became apparent after the acquisition was the obsolescence of factory equipment. Firestone had been at a competitive disadvantage in global competition since the 1970s, and equipment renewal had been deferred for years. All five U.S. and six European plants had been left in a state of low productivity, and Bridgestone decided on an additional capital investment of 150 billion yen for equipment upgrades. Combined with the acquisition price of 340 billion yen, Bridgestone ultimately invested a total of 490 billion yen in the acquisition and rehabilitation of Firestone.

The equipment obsolescence had not been adequately factored into the acquisition, representing an unexpected expenditure for Bridgestone. The acquisition price inflated by the bidding war with Pirelli, GM's contract termination, and additional investment for equipment renewal created a structure that imposed a triple burden on post-acquisition management.

The acquisition of Firestone provided Bridgestone with five U.S. and six European plants, establishing a global production structure spanning Japan, the U.S., and Europe in a single stroke. In addition to these production bases, acquiring Firestone's brand and sales network resolved the distribution problem that had remained unsolvable since the Nashville plant acquisition in 1983.

Although post-acquisition performance was challenging, Bridgestone advanced the rehabilitation through dispatching production engineers, quality improvements via the sister-plant system, and organizational restructuring and large-scale layoffs through the establishment of BFS in 1992. The total investment of 490 billion yen was enormous, but without this acquisition, it would have been difficult for Bridgestone to establish a position alongside Michelin and Goodyear in the global tire market.

The Firestone acquisition, despite facing triple headwinds of price escalation through the bidding war, GM's contract termination, and equipment obsolescence, was a management decision that irreversibly advanced Bridgestone's globalization over the long term. The fact that rehabilitation took nearly a decade demonstrates that the outcomes of major M&A transactions cannot be assessed in the short term.