Bad Habits May Slow U.S. Push Into the Future

Are we over the hill? In the same week that Firestone sold its 88-year-old tire business to a Japanese company and the Bank of Tokyo bought Union Bank of California, the cover of Newsweek posed the question that is on many people’s minds: Is America in decline?

Not necessarily. The survey of 282 business executives in the United States, Japan and other Pacific economies--conducted by The Times and management consultants Booz-Allen & Hamilton--found strong agreement that American companies remain world leaders in almost all important technological fields.

But competition gets even more intense in the next 10 years, the survey concludes, as Japanese companies challenge U.S. firms for world technological leadership. And U.S. business, which has been congratulating itself on becoming lean, mean and competitive, will be challenged as never before.

That’s no reason to hang our heads, but it is a warning to change bad habits. “We have tremendous advantages,” says D. Bruce Merrifield, assistant secretary of commerce for technology, “if we can just get our act together.”

The survey found chronic weaknesses--U.S. companies too impatient for a quick pay-back on investment, U.S. managers ignorant of technology--that add up to a big question about the will to win. Does U.S. industry have the will to persevere in brutally competitive global industries?

The tire industry, for example. Last week, Firestone Tire & Rubber Co. agreed to sell 75% of its tire operations to Bridgestone of Japan for $1 billion. Firestone, founded in 1900 in Akron, Ohio, helped spread U.S. industrial leadership worldwide. Now it is bowing out and providing a sad illustration of the importance of technology and will.

Firestone’s failure began in the 1970s with the shift to radial tires, a product from Michelin of France that lasted longer and rode better on superhighways. U.S. tire makers--except for Goodyear--were slow to change to radials. And when Firestone did, it produced the 500 tire--a defective product and expensive failure.

Firestone lost its nerve after that. In 1979, the Firestone family--third-generation heirs of Harvey Firestone--worried about losses and their 25% ownership of the stock, which languished at less than $10 a share. So the family hired John J. Nevin, a financial executive who had served at Zenith and Ford, made him chairman and promised him a bonus based on the stock price if he saved the company. Many in Akron say the family told Nevin to get out of tires, but Firestone spokesmen deny this.

Selling Birthrights

In any event, Nevin closed plants, reduced the work force and diversified. He produced earnings and the stock price rose, hitting $50 a share last year--when Nevin collected a $5.6-million bonus.

Last week, he sold the remaining tire operations--still a business with $2.5 billion in sales and 9% of the world market, including good position in Latin America and Europe. Why sell out? Because tires aren’t earning a sufficient profit, says a Firestone spokesman.

Then why is Bridgestone buying? Is it a nonprofit institution? No, it’s a company that sees the losers dropping out of the business and rewarding markets in China, India and elsewhere awaiting the tire makers that survive.

One doesn’t have to be Japanese to see that. Goodyear, the industry leader, can see it. But Firestone could not or did not see it.

So like the biblical Esau, another American company sells its birthright. Reports say the $1 billion Bridgestone pays will be distributed to present Firestone shareholders--the family has already sold most of its holdings--to “maximize shareholder value,” a frequent euphemism for liquidation.

Fortunately for Firestone’s 5,000 employees, the new owners are committed to the business.

Bridgestone is spending $70 million now to expand a truck tire plant in Nashville that it bought from Firestone five years ago.

It may be unsettling to think that the livelihoods of American working people are more secure with Japanese ownership than in the hands of U.S. managers and owners. But the Firestone case makes such suspicions hard to deny.

Is America in decline? No, but it has some bad habits to work on.