Fortunes of a Country and a Multinational Are Linked : The Ties That Bind Firestone and Liberia Together

For many years, the fortunes of Liberia and the Firestone Tire and Rubber Co. have been closely linked.

Both have been going through hard times since Gen. Samuel Doe seized power in a bloody coup in April, 1980.

Liberia has suffered continuous political instability that climaxed in an abortive coup last November in which at least several hundred people were killed.

The bloodshed further eroded business confidence, which has contributed toward the country’s serious economic decline shown by an annual 4% drop in real gross domestic product and escalating unemployment.

Firestone’s financial problems have also been aggravated by record low world rubber prices, which helped account for a loss of nearly $50 million during the last quarter of 1985, company sources said.

$500-Million Investment

Firestone, the second-largest American tire company, is one of the oldest, as well as the most important, American investments in Liberia, totaling about $500 million.

The Akron, Ohio-based company owns the world’s largest industrial rubber plantation at Harbel, an hour’s drive from Monrovia, the capital. Named after its founder, Harvey Firestone, and his wife, Isobel, it was started in 1926 in order to break the Anglo-Dutch monopoly of the world rubber trade.

Now the plantation covers about 75,000 acres and the long, symmetrical lines of tapped rubber trees stretch over the horizon. Along with production from small farms, Firestone accounted for more than half of the 76,000 tons of rubber exported by Liberia in 1984.

During World War II, Liberia was a strategically important supplier of natural rubber for the American war effort, while the nearby Robertsfield International Airport was a vital staging post for transporting U.S. troops to Europe.

“It is no accident that the airport is much closer to Harbel than Monrovia,” a businessman pointed out.

No Pull-Out Plans

Liberia is Africa’s main rubber producer even though it accounts for only 2% of world production. Rubber is Liberia’s second major export after iron ore and represents nearly 20% of export earnings.

Despite the difficult political and economic situation, Firestone has no plans to pull out. “Our policy is to maintain assets and stabilize output,” Harbel’s president, Don Weihe, said.

There were reports that Firestone might be leaving after its decision three years ago to sell its smaller Cavalla plantation near the Ivorian border and to cut its work force by 4,000.

Firestone is replanting 3,000 acres a year and has kept the average age of trees at a relatively youthful and productive 15 years, Weihe added.

Business sources said Firestone was unlikely to leave Liberia as Harbel is its main internal source of natural rubber supply.

The sources added that Firestone had long since amortized its original capital investment, which helped improve its financial returns.

Capacity Increased

Apart from replanting, Firestone has also increased the capacity of its rubber block production line to 2,000 tons a month and installed 15 new centrifuges in its 5,000-tons-a-month latex-processing plant.

Although Firestone is essentially a tire manufacturer, about 70% of its output is latex, which is used mainly to produce surgical tubes, gloves and balloons.

Firestone complains that it is difficult to compete with Southeast Asian producers because of high labor, social and infrastructure costs.

The local dollar currency puts Liberian rubber companies at a disadvantage with their competitors, who use weaker currencies.

Firestone is the country’s second-largest employer after the government, with nearly 10,000 people on its payroll. When families and dependents are taken into account, Firestone is supporting a population of about 100,000 people, company officials point out.

In the absence of government facilities, Firestone provides medical services, including 250 hospital beds, schooling for more than 7,000 students, 16 community centers and eight churches.

Resisted Revisions

It generates its own power and maintains a 600-mile road network, of which 40 miles are paved.

Firestone renegotiated its 50-year concession with the previous civilian government in 1976 and has resisted efforts by the Doe government to revise the terms.

Analysts also think it unlikely that Firestone will respond to a recent government decree enabling foreigners, including concession holders, to purchase land.

“Times are tough and the future uncertain. Firestone has little money or incentive to purchase its plantations. It is hard enough hanging on,” one business source said.