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Firestone Tire & Rubber
Team 5
AgendaHistorySWOT Analysis: StrengthSWOT Analysis: Opportunities
SWOT Analysis: ThreatsSWOT Analysis: Weaknesses
AftermathRecommendations
“Mission
“We aspire to offer the best for our customers and to society, not only in terms of our products, services and
technology, but in all of our corporate activities. Our commitment to quality stems not from want of profit, but
from a passion for improving the safety and lives of people everywhere. Through our Mission, we strive to be a
company trusted by the world - a company in which all of us can take great pride”
What is Firestone?
◉ Founded in 1900 by Harvey Firestone◉ Supplied tires to wagons and buggies
American Tire Company
History
How Firestone Started?
◉ Originally based out of Akron, Ohio also the home to Goodyear Tire Company
◉ Started with 12 employees
◉ Goodyear & Firestone two largest tire manufacturers for over 75 years
19 06
19 18 19 26
19 20 19 36
First Canadian Branch Auto Care
Liberian Rubber
Plantation
Model T Tire Oldfield Tire Opened Plant in Memphis,
Tennessee
Defense contracts from U.S. Government to produce:◆ Plastic helmet liners◆ Artillery shells◆ Aluminum kegs for food transport◆ Other rubberized military products
World War 2
SWOT Analysis Alert- Opportunity
◉ U.S. government reached out to them to produce war products
◉ Firestone adapted and started manufacturing equipment
◉ Led to future defense contracts ◉ In 1951 Firestone produced the MGM-5 Corporal
missile; a surface to surface guided missile which had the capability of holding a nuclear explosive during the Cold War
◉ What was known as a simple tire company literally went nuclear!
SWOT Analysis- Strength Alert
◉ A pioneer in the mass production of tires◉ “It’s not what you know, it’s who you know”- Harvey
Firestone was good friends with fellow entrepreneur Henry Ford and used that connection to to be the original supplier of Ford, the biggest automobile company of the era.
◉ Firestone pushed many of the industry's innovations, including vertical integration of rubber production in tire manufacturing and product retailing strategies.
From Left to Right: Henry Ford, Thomas Edison, Harvey Firestone
SWOT Analysis- Strength Alert
◉ Firestone's innovations included the 1907 "demountable rim," which allowed the wheel and tire to be removed together. The spare tire was born.
◉ The 1911 Indianapolis 500 was won with Firestone Tires.
◉ Firestone-shod Cars won all Indy 500 races from 1920 to 1966.
SWOT Analysis- Strength Alert
◉ Great advertisement and increased their reputation becoming the leading supplier in automotive tires in North America for most of the century.
◉ Retired from racing after several racing tragedies from 1972 to 1974, but returned in 1995 & they are now the lone supplier of tires for the IndyCar Series.
Firestone’s Booming Decades
◉ Moving into 1970’s, Firestone saw seven decades of high growth
◉ Goodyear & Firestone controlled tire industry◉ Saw U.S. Tire Companies as their competitors◉ Only problem was keeping up with the demand for
their tires◉ Firestone’s Operating & Capital Allocation
Processes were designed to exploit booming tire industry
◉ Strong core values for company and extreme loyalty from customers & employees
Overnight Everything Changed - Threats
◉ Michelin, a French company, introduced the radial tire to U.S. market
Why was this a problem?◉ Everyone wanted them, they were:
Long-lastingSaferMore economical
◉ In 1972, Ford announced all new cars would have radial tires
◉ The company and tires that dominated Europe would now dominate the American Market
Close Call- The Great American Streetcar Scandal
◉ In 1949, Firestone among other companies, were convicted of conspiring to monopolize the sale of buses and other transportation products to the NCL (National City Lines)
◉ Although their case was shortly dropped other companies weren’t so lucky. (GM was fined $5,000)
How did Firestone Respond?
◉ Firestone saw radials coming a decade before they hit the American market, so they were “prepared”
◉ Invested 400 million dollars into radial tires; equivalent to over a billion dollars today
◉ Built a new factory dedicated to radial tires & quickly converted some existing factories
◉ Firestone’s responded fast to the change, but their response was not efficient nor effective
Where Firestone Went Wrong?
◉ Delayed closing off of its old factories; keeping fixed costs and Manufacturing Overhead higher than it needed to be for production
◉ Did not change production process to meet quality standards demanded and needed for radial tires
◉ Refused to look at activity based costing Expenses for radial tires were too high and revenue
from older style tires were to low
Adding Fuel to the Fire
◉Had poor inventory control◉Renting warehouses to store all their unsold products; raising selling costs
◉Plants were running at a deadly low 59% capacity
◉Lost over 200 million dollars just in cash
◉Poor quality radial tires lead to unbearable losses in numerous product recalls
Continued Mistakes
◉ Radials lasted twice as long causing demand for tires to level off
How did Firestone Respond?◉ Assumed high demand would last
forever & refused to close unnecessary & costly plants
◉ Did not budget therefore they failed to realize sales would decrease in the future and that they needed to produce less tires
SWOT Analysis- Threat Alert
◉With the spread of radial tires in Europe during the 1950’s and 60’s Firestone had ample time to prepare for when it came to the American market.
◉Unfortunately Firestone wasn’t able to capitalize on the opportunity and the radial tire that was introduced by the French company Michelin became a threat to Firestone.
SWOT Analysis- Weakness Alert
◉ The 1970’s was a grim time for Firestone. Both management and engineers of Firestone continued to prove their incompetence.
◉ In 1978 Firestone recalled over 7 million radial tires, the largest tire recall to date. The tire was found to be faulty and the cause of over 250 deaths.
SWOT Analysis- Weakness Cont.
◉ In 1980, after proving the defectiveness of their radial tire the NHTSA (National Highway and Traffic Safety Administration) fined Firestone $500,000, the largest fine on any U.S. corporation up to that point. Also, countless lawsuits had to be settled.
◉ Firestone’s reputation crumbled during this period and sales plummeted.
SWOT Analysis- Weakness Cont.
◉ In 1996, several state agencies in Arizona began having major problems with Firestone tires on Ford Explorers.
◉ Firestone investigated the complaints, tested the tires and asserted the tires had been abused or under-inflated.
◉ Ford requested the addition of nylon ply to the tires and suspension changes to the Explorer model in Venezuela
◉ Ford did not specify adding nylon ply to U.S.-made Firestone tires nor changes to Explorer suspension on US models at this time.
◉ High failure rate in a variety of Firestone tires resulted in multiple lawsuits and eventual mandatory recall
◉ 2001 Bridgestone/Firestone severed ties to Ford due to lack of trust.
SWOT Analysis- Threat Alert
◉With Firestone tripping over itself, two opportunistic foreign tire companies, Bridgestone and Pirelli (italian company), tried to use Firestone as their way into the American market
◉After a failed attempt by each company to buy Firestone, Bridgestone finally came out on top and acquired Firestone in 1988.
Aftermath and Lessons Learned
What happened to Firestone?
◉Due to budgeting, planning, costing breakdown failures and straight ignorance and arrogance, they lost control of American market
◉Foreign companies took control of American tire market
◉Survived through two hostile takeover bids◉Finally, acquired by Bridgestone (Japanese
company) in 1988 for 2.6 billion dollars
Premium Paid for Firestone
◉ Stock was very undervalued at $35.75 a share when the sales price of $80 a share was agreed on, but not final
◉ Investors simply lost faith in Firestone◉ Stock soared to over $65 a share in speculation
of the deal before it became final◉ Bridgestone paid 117% Premium for Firestone◉ Pieces and loyalty of the company was highly
valued
Why Did They Still Produce Non-Radial Tires?
◉Stuck to what they knew◉Overestimated customer loyalty and thought
their loyalty and product were better than any new product could be
◉Incorrectly forecasted demand
BAD BUDGETING
$200 millionLost Cash
$400 millionUnaccounted for in R&D budget
Bad Budgeting
◉ They were not producing or selling enough radial tires to even come close to cover the radial tire expenses
◉ Did not properly budget and forecast the predicted demand for their non-radial tires
◉ Creating millions of dollars of unwanted Inventory in rented warehouses
◉ Increased Selling Costs
Recommendations
Adapt to changing consumers preferences and competition
Recommendation
Communication between sectors and supply chain
Creation of an activity-based costing
Bridgestone Sales & Net Income
Sales Net Income
Bridgestone’s Assets
2011 Canadian/US Market Share
“The growth and development of people is the highest calling of leadership.
It is only as we develop others that we permanently succeed.
You get the best out of others when you get the best out of yourself.-Harvey Samuel Firestone
Questions?Thanks!
Kory BorenkoffAndrew ChinDaniel Lavian
Sarina LeeMaxim Shubin
