Bridgestone — Company History

Founding, the early defects, and reorganisation through war and peace

In March 1931 Ishibashi Shojiro (石橋正二郎) split the tyre division out of Nihon Tabi and incorporated Bridgestone Tire Co. at Kurume in Fukuoka prefecture, a family firm funded entirely by the Ishibashi household. The name was made by translating 石橋 — stone bridge — into English and reversing the halves, with the sense of a keystone, the wedge at the crown of an arch, laid over it. Capital was ¥1 million, and production had begun after trial work in a temporary shop set up inside the Nihon Tabi compound in December 1929. Foreign tyres sold at upwards of ¥100 each; Bridgestone came into the market at ¥50, half that price, and early defects followed one after another, blowouts while the vehicle was running among them. Because the company backed its tyres with a guarantee that exchanged a faulty one for new, some people damaged tyres deliberately in order to return them, and against 440,000 tyres produced in the first three years, returns reached 100,000. It honoured the exchanges all the same, thinning the loss by repairing returned tyres for handcarts or sending them back as feedstock for reclaimed rubber; even so, the loss over those three years passed ¥1 million, more than its capital.

Holding the losses down by diverting returned tyres into repaired sales and reclaimed-rubber feedstock, Ishibashi spent several years improving the compound formulation and the vulcanising process. The attempt was to carry rubber vulcanising technique, accumulated in the mass production of jika-tabi — rubber-soled split-toe work footwear — across to the car tyre, and the ground for it had been laid when he turned the family business over to tabi alone in 1907, founded Nihon Tabi in 1918, and fixed vulcanising know-how inside the company with the Asahi Jika-tabi of 1921. Once quality settled, the tyres were certified as a superior domestic product in 1932 and carmakers began to adopt them, Ford Japan among the first. In 1934 the company put up a proper reinforced-concrete plant at Kurume and increased deliveries to the fledgling Japanese makers, Toyota and Nissan among them. In July 1938 it acquired Nihon Gomu's Yokohama works, taking a volume production site in eastern Japan as well.

The rubber-processing technique consolidated in tyres spread to adjacent products: golf ball production began in October 1935, the head office moved to Tokyo in May 1937, and hose production started that September. Under wartime conditions the company renamed itself Nippon Tire Co. in February 1942 to avoid an English name, and took on the production of tyres for military lorries and of aircraft-related components. In October 1949, after the war, it split the bicycle business off as Bridgestone Cycle and narrowed its resources onto tyres. In February 1951 it restored the name Bridgestone Tire Co., and in the same year concluded a technical tie-up with Goodyear of the United States. On its own reckoning its productivity stood at about a fifth of the American makers', and it set about raising that figure by bringing in the latest production technology.

The pre-war export drive, plants abroad, and everything lost in defeat

Alongside domestic production the company went at exports, beginning shipments to China, South-East Asia and India in 1932 — 40,000 tyres that year, rising to 100,000 in 1933. European and American tyre companies, feeling the threat of cheap Japanese goods, answered with price cuts, and after the Ottawa Conference of 1932 sought to shut them out by imposing special duties of 30 to 60 per cent across their respective dependencies. The products were taken up in those markets even so, and by 1934 exports reached Africa, Turkey, Belgium and Germany. Ishibashi had ridden in a motor car in 1912 and bought one for himself; at that time there were roughly 300 cars in Tokyo and not a single one in Kyushu.

Between 1937 and 1941 it built plants abroad in quick succession — at Qingdao, Jilin, Keijo and in Taiwan — producing car tyres, bicycle tyres and conveyor belts. At the Jilin works it also began making synthetic rubber. Raw rubber, however, depended on imports: after the tightening of the Foreign Exchange Control Law in July 1937, imports of raw rubber for civilian use were put under licence that December, and by the closing stage of the Pacific War the loss of the southern plantations made the shortage of feedstock acute. All of these overseas plants were lost when the war ended, and the export network and the continental production sites built up before it vanished with them. Post-war reconstruction began with the restart of production at the Kurume plant, which had escaped the bombing. Having lost its overseas sites and its export network at a stroke, the company's field of growth was confined to the domestic market until it bought Firestone of the United States in 1988.

Thirty years unlisted, and volume production at the new Tokyo plant

Under Ishibashi the company stayed unlisted for thirty years, until it floated in October 1961. In January 1952 it completed the Bridgestone Building at Kyobashi in Tokyo, with the Bridgestone Museum of Art attached to show the Western art the Ishibashi family had collected over many years. The Kyobashi land, left vacant by the Great Kanto Earthquake, had been acquired in 1938 and used during the war as a provisional wooden office. In March of that same year the Ishibashi family filed the largest wealth-tax return in Japan, showing in a little over twenty years since the founding what a family firm could accumulate. Ishibashi had left Kurume Commercial School in 1906 and taken over the family tailoring business, Shimaya, together with his elder brother, rebuilding it by abolishing the apprentice system and putting the workers on salaries.

Bringing production in-house advanced over the same period. In 1955 the company completed, inside the Kurume plant, the only tyre-cord factory in Japan, committing to integrated manufacture from cord through to finished tyre. In 1958 it added the Kurume No. 2 plant and began volume production of nylon-cord tyres. The Tokyo plant, planned from 1958, finished its first construction phase and began operating in March 1960; by 1965 it covered 600,000 square metres, employed 2,100 people and had annual capacity of 4.1 million tyres. It used a complete flow system in which materials entered one end of a building 430 metres long and finished product left the other without ever doubling back, equipped with an H.T machine 34 metres tall and automatic tyre-building machines. Reporting before construction began said the company is to install production facilities on a scale no smaller than its Kurume plant (a site of 100,000 tsubo, monthly capacity 2,500 tonnes) (日本経済新聞, February 1958).

In October 1961 the shares were listed on both the Tokyo and Osaka stock exchanges, opening the way, in the thirtieth year since the founding, to capital investment funded from outside. In 1962 the company built the Nasu plant in Tochigi prefecture for small tyres alone, dividing production by product type. Sales for the 1964 financial year were $190.3M (¥69bn), made up of ¥48.3 billion in tyres, ¥8.3 billion in consumer goods, ¥6.1 billion in industrial products and ¥5.8 billion in cycles; exports accounted for ¥10.9 billion of that, up 40 per cent on the ¥7.8 billion of the year before. Pre-tax profit for the year was ¥5.8 billion and after-tax profit ¥3.5 billion, for a return on total capital of 8.9 per cent. How few plants it ran stood out against its competitors: car tyres were produced at the Kurume plant alone until 1960. Even so, output exceeded the combined output of every plant belonging to Yokohama Rubber, Toyo Rubber and Sumitomo Rubber (ダイヤモンド, 25 January 1965).

The founder's exit, and Australian and American sites as the turn abroad

Direct management by the Ishibashi family passed to professional managers during the 1970s, and by 1978 Shibamoto Shigemichi (柴本重理) held the presidency. In September 1976 the founder, Ishibashi Shojiro, died, and the symbol of the family management that had led the company since before the war was gone. At home it had pulled far ahead of its rivals, but there was little room left to grow. A trade assessment of the day summarised the domestic tyre industry as one strong, three weak, two all but dead, and went on: Bridgestone's gloom will not lift until it sets foot inside the United States, so long as the limit on its development is the one imposed by an ultra-conservative management that will not cross a stone bridge even after tapping it, when it comes to diversifying at home (週刊東洋経済, 9 July 1977). For a company holding half the domestic market, the next stage of growth could only be sought abroad.

The footholds abroad were built in stages. In June 1967 the company set up the joint venture Thai Japan Tyre in Thailand, and in September 1973 placed another joint venture in Indonesia. In December 1980 it bought shares in Uniroyal Holdings of Australia, gaining a production site overseas. In November 1982 it established Bridgestone Tire Manufacturing in the United States and stepped into producing on its own account in North America. In April 1984 it changed its trading name from Bridgestone Tire to Bridgestone Corporation, carrying its global reach as a dedicated tyre maker into the name itself. Bridgestone Spalding, a joint venture founded in September 1972, developed in January 1993 into Bridgestone Sports, which consolidated the sporting-goods business.

In 1985, at the wish of the owner Ishibashi Kanichiro (石橋幹一郎), Ieiri Akira (家入昭) became president — a career manager drawn from outside the Ishibashi family and regarded as the standard-bearer of the move away from family control. What Ieiri had his eye on was the American replacement-tyre market: against a scale of 100 to 200 million tyres a year, exports came to 2.5 million, a share of just under 2 per cent, and raising that to 4 per cent was set as the immediate target. Holding half the market at home while owning almost no production sites abroad, with a strong yen, a maturing domestic market and a worldwide reshaping of the industry all arriving together, Ieiri judged that securing a place among the world's big three required networks of production and sales in America and Europe.

The Firestone acquisition, and the integration problem a recall exposed

In February 1988 Bridgestone agreed to take 75 per cent of a joint-venture company, formed by splitting off Firestone's tyre division, for $750 million. In March, however, Pirelli of Italy announced a bid for all the shares, so Bridgestone moved to a counter tender offer and in April acquired 96.4 per cent. The total came to $2.6 billion — about $2.6B (¥330bn) in yen, equal to six-tenths of a year's sales. It gained eleven plants in America and Europe and a dealer network of roughly 1,500 outlets at a stroke; the corporate record dates the acquisition to May 1988. Some bankers took the view that, depending on how things went from there, the weight of that financing could shake the company. Ieiri described the acquisition as a whale swallowing a whale.

Integration ran into difficulty from the start. Because the tender offer had been made in haste, the plant had not been examined properly, and the state of decay exceeded expectations. Firestone had closed nine plants and cut 50,000 jobs over the defective-tyre problem of the late 1970s and had stopped investing afterwards, so its productivity stood at under a third of Bridgestone's. Less than a year after the acquisition, a further $1.5 billion of investment was forced on the company. General Motors, a major customer, gave notice immediately after the deal that it would drop the Firestone brand, and the share of deliveries to the Big Three fell from 21.5 per cent in 1987 to 9 per cent in 1989. Consolidated net profit for the 1989 financial year, with interest payments and foreign-exchange losses landing together, fell to $69.6M (¥10bn), a quarter of the previous year's, and the inherited plants saw large-scale strikes across 1994 and 1995. The Firestone business did not turn a profit for a reporting period until the second half of 1992.

In May 2000 the National Highway Traffic Safety Administration of the US Department of Transportation opened an investigation into a run of rollover accidents involving Ford's Explorer sport-utility vehicle. In August the agency published a death toll, and a voluntary recall of 6.5 million Firestone tyres was settled on. Bridgestone at first left the response to the vice-president in charge on the ground and adopted a policy of not answering enquiries in Japan. President Kaizaki Yoichiro (海崎洋一郎) did not hold an explanatory press conference in Tokyo until 11 September, after the US congressional hearing of 6 September. Sales and profit figures had reached Kaizaki, but information on litigation and accidents had not, and a structure that had left risk management to the subsidiary worked against the company. Losses relating to the recall came to $755.5M (¥81bn) in the year to December 2000 and, taken with the year to December 2001, reached ¥161.7 billion across the two periods. In May 2001 the supply contract with Ford for North America and Latin America, which had run for close to a century, ended at its expiry.

Reorganising the Americas, and widening the Asian production network

The governance arrangements were rebuilt in the wake of the quality problem. In December 2001 Bridgestone/Firestone began a reorganisation under a holding company for the Americas, splitting the business into separate companies by activity and dividing out functions such as tyre manufacturing, retail and raw materials. The building-out of overseas sites had been continuous since the late 1990s: in January 1997 it bought a company holding Firestone South Africa as a consolidated subsidiary, in July 1998 it placed a site in Poland, and in November 1999 one in the United Arab Emirates. In China it acquired Tianjin Kumho Tire in January 2000, then in February 2003 established Bridgestone (Wuxi) Tire and entered production of passenger-car tyres, and in October 2004 set up Bridgestone (China) Investment to separate out the regional holding function.

Production and raw materials were also rearranged region by region. In July 2005 the company established Bridgestone Tatabanya in Hungary to fill out its central European production network, and in August that year bought Goodyear Sumatra Plantations in Indonesia, giving it a base from which to source natural rubber for itself. In July 2006 it set up Bridgestone Asia Pacific in Singapore, placing there the function that tied together Asia, Oceania and India. Production in the United States had been carried by Bridgestone Tire Manufacturing, established in November 1982, and that company merged with Bridgestone/Firestone in May 1990.

Retreading, the North American recovery, and clearing out the non-core

The span of the business also widened, both upstream and downstream of the tyre itself. In May 2007 Bridgestone Americas Holding acquired Bandag of the United States and entered the retread business in earnest. The price was about $1.0B (¥120bn), and the intent was to take in the whole life of a tyre rather than the sale of new ones alone. In May 2012 the company established Bridgestone Specialty Tire Manufacturing in Thailand, a dedicated site for the high-value products used on mining and construction vehicles and on aircraft. In June 2014 it bought Masthead Industries of the United States, gaining a North American base for the diversified-products business, and in May 2017 Bridgestone Europe acquired Ets Paul Ayme of France, adding it to the European dealer network.

It took a little over twenty years from the acquisition for North America to become a pillar of earnings. The Decatur plant was closed in 2001 and the Oklahoma plant in 2006, and in 2009 passenger-car tyre production ended at the LaVergne plant in Tennessee. Replacing the American management team in 2010 proved the turning point: they are doing the work while giving proper thought to the profit of the group, said chief executive Tsuya Masaaki (津谷正明). Of the ¥378.6 billion of operating profit in the nine months to September 2015, the Americas accounted for $1.4B (¥171bn), more than the ¥138.6 billion earned at home. The sales network, taking over Firestone's 1,500 outlets and 550 from Morgan Tire of the United States, numbered 2,200 company-owned stores, and 5,200 including contracted dealers.

In October 2015 the company announced it would buy Pep Boys of the United States for about ¥100 billion, but the investor Carl Icahn, a major shareholder, bid against it and drove the price up; when an offer of $18.50 a share was reached, Bridgestone stopped following. It no longer works as a business, there is no economic rationality in it, Tsuya said. In April 2019 it acquired TomTom Telematics of the Netherlands and placed it at the centre of the solutions business. For the year to December 2020 revenue was $28.1B (¥3tn) and operating profit ¥62.5 billion, while the result attributable to owners of the parent sank to a loss of ¥2.0 billion. Ishibashi Shuichi (石橋秀一), who took office in March 2020, framed this as a third founding, Bridgestone 3.0, and pressed on with clearing out non-core businesses, selling Firestone Building Products of the United States in January 2021 at an enterprise value of $3.4 billion. For the year to December 2021 revenue recovered to $29.6B (¥3.25tn) and net profit to ¥394.0 billion.