Firestone was once a pioneer and leader in the tire industry but made several strategic mistakes that led to its decline. It failed to adequately prepare for the introduction of radial tires to the US market in the 1970s despite seeing them come to Europe a decade prior. Firestone's response was inefficient, as it kept old factories open and production processes did not meet quality standards for radial tires. This caused huge financial losses. Further, several recalls due to faulty radial tires in the 1970s-1980s damaged Firestone's reputation and market share. Bridgestone eventually acquired Firestone in 1988 after it lost control of the American tire market to foreign competitors.

1. Firestone Tire &
Rubber
Team 5

2. Agenda
History
SWOT Analysis: Strength
SWOT Analysis: Opportunities
SWOT Analysis: Threats
SWOT Analysis: Weaknesses
Aftermath
Recommendations

3. “
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”

4. What is Firestone?
◉ Founded in 1900 by Harvey Firestone
◉ Supplied tires to wagons and buggies
American Tire Company

5. Firestone Commercial- 1960’s

6. History

7. 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

8. 19
06
19
18
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26
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36
First Canadian
Branch
Auto Care
Liberian Rubber
Plantation
Model T Tire
Oldfield Tire Opened Plant in
Memphis,
Tennessee

9. 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

10. 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!

11. 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.

12. From Left to Right: Henry Ford, Thomas Edison, Harvey Firestone

13. 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.

16. 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.

17. 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

18. 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-lasting
Safer
More 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

19. 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)

20. 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

21. 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

22. 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

23. 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

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. Aftermath and Lessons Learned

30. 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

31. 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

32. 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

33. BAD BUDGETING

34. $200 million
Lost Cash
$400 million
Unaccounted for in R&D budget

35. 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

36. Recommendations
Adapt to
changing
consumers
preferences and
competition
Recommendation
Communication
between sectors
and supply chain
Creation of an
activity-based
costing

37. Bridgestone Sales & Net Income
Sales Net Income

38. Bridgestone’s Assets

39. 2011 Canadian/US Market Share

40. Recent Bridgestone Commercial

41. “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

42. Questions?
Thanks!
Kory Borenkoff
Andrew Chin
Daniel Lavian
Sarina Lee
Maxim Shubin