Sale of Firestone to Japanese Not a Threat, Buyer Says
Cash-rich Japan moved to take its biggest bite yet out of American industry Thursday, when Japan’s largest tire maker said it would buy Firestone, one of the oldest and most venerable names in American corporate history.
And on Friday, executives of Bridgestone Corp. of Tokyo moved quickly to reduce any international tensions over the $2.6-billion acquisition, stressing that they plan to keep Firestone operations intact and autonomous.
“We plan to conduct the day-to-day operations of the two companies on an independent basis so that the management of Firestone is capable of making quick decisions,” said Bridgestone President Akira Yeiri, who traveled to Firestone’s tire headquarters in Akron for a press conference. “Consequently, we will consider headquarters as existing in both Tokyo and Akron.”
In an interview, Yeiri also stated that Bridgestone has no plans to lay off any workers or close any Firestone plants that are currently operating.
The Firestone purchase would be the largest U.S. investment by the Japanese, exceeding Sony’s $2-billion purchase of CBS Records, a deal that was completed in January.
Bridgestone said it would launch its $80-a-share offer on Monday. Firestone stock soared $15.25 a share to close at $77.75 Friday on the New York Stock Exchange.
The bid apparently was enough to close off any further interest by Italian tire maker Pirelli, which had already begun a $58-a-share offer. The company did say, however, it would wait to terminate its offer until it sees how the Firestone-Bridgestone merger progresses.
In a pointed statement, the Italian company said it “has always said that the Pirelli offer would be limited by its evaluation of industrial logic--the figure offered by Bridgestone does not fit into such logic.”
The proposed purchase also raised questions whether it matters that the productive capacity of the United States is increasingly being controlled from Japan. Economists and corporate executives are split, but they all agree that the Bridgestone purchase is just a sign of things to come.
Foreign investment in the United States has been soaring over the last few years, as Asian and European investors have flocked to American real estate, banks, government bonds, and domestic plant and equipment.
Growing Trend
But now, foreign manufacturers are increasingly eager to invest in their huge American competitors, perhaps sensing a quick way to gain a solid and permanent presence in the American market.
Today, the cheap dollar, which has often placed bargain prices on American assets, coupled with the cash the Japanese, Germans, Koreans and others are amassing from their trade surpluses with the United States, virtually insures that more and more big-name American corporations will be snapped up by foreign investors.
“This is part of what’s going to be a growing trend,” noted Robert Reich, a Harvard economist and public policy analyst. “With the dollar priced so low, and American companies so uncompetitive, it’s as if America announced a fire sale, with everything marked 40% off regular price.”
“We’ve had a bunch of smaller acquisitions, and I think it was inevitable that we would get a big one like this,” added Robert Cole, an expert on Japanese-American relations at the University of Michigan. “I think this is going to be a major policy issue over the next 10 years. The buying of America is going to replace protectionism as an issue.”
Certainly, Bridgestone did buy a big chunk of American industrial history this week. Ever since Harvey Firestone and Henry Ford used to pal around together while jointly putting the world on wheels, Firestone has been synonymous with tires in America. Founded in 1900 in Akron, Ohio, Firestone is still the largest tire supplier to Ford, and one of the largest suppliers to General Motors.
Purchase ‘Unique’
Overnight, Bridgestone has become a major force in the American tire industry. Although it is the largest manufacturer of tires for passenger cars in Japan, it was previously only in the truck tire business in the United States.
Speaking through an interpreter, Yeiri sought to separate Bridgestone’s acquisition from any wave of Japanese investment in the United States. The purchase, he said, is unique; that it was largely the result of a worldwide consolidation in the tire industry.
“We need to differentiate between just having a lot of money and buying land in the United States, and a strategic move like this one,” Yeiri said. “Having extra cash and buying land is just an investment. What we have done is a strategic maneuver that we felt was necessary to remain competitive in the tire industry.”
John J. Nevin, Firestone’s chairman and the man who engineered the deal with Bridgestone as an alternative to an unfriendly takeover bid from Pirelli, an Italian tire maker, also argued that the Japanese acquisition is not necessarily a sign of a growing Japanese dominance over the American economy.
“If Bridgestone had not responded, and Pirelli had won, I don’t think there would have been any concern that Italian industry was dominating the world,” Nevin said.
But Nevin agreed that the cheap dollar is increasingly making American corporations easy targets for foreign raiders.
“You can’t have it both ways,” said Nevin. “You can’t have a weak dollar to finance our exports and improve our trade situation, and then say you need a strong dollar for capital investments. I don’t think we can live in a world where a Firestone can invest around the world, and say that’s capitalism, and then say if a Japanese company invests in the United States, that’s a catastrophe instead of capitalism.”
Long-Term Consequences
Still, more and more economists are wondering about the long-term consequences for the American economy when investment decisions affecting American workers are increasingly made overseas. When sales slow down, for instance, where will the Japanese lay off workers first--Akron or Tokyo? And what will happen to the purely American firms who must compete for business against Japanese companies that now have extensive manufacturing and distribution networks in the United States?
“What I view with alarm is the nature with this particular investor, Japan, has carried on around the world,” said Ronald Danielian, president of the Washington-based International Economic Policy Association, a non-profit research firm funded by American industry.
“The Japanese tend to keep the money within the family. Up and down the economic system, they try to keep it all within the Japanese circle,” Danielian said. He predicted that now that Bridgestone has a big American operation, it will become the main tire supplier for the Japanese auto plants in America, displacing U.S. firms like Goodyear.
Bridgestone?
It’s not a Japanese name, and here’s why: Shojiro Ishibashi, above, founded the company in 1931 at a time when imported goods were widely admired in Japan. In his memoirs, he says: “I translated my name, Ishibashi (Stonebridge), into English and reversed the word order to make Bridgestone, as I felt it would be more acceptable internationally.” The company started as a maker of tabi , traditional Japanese footwear. The invention of rubber-soled tabi in 1923 propelled Nippon Tabi into the rubber manufacturing industry. The name was changed to Nippon Tire Co. during World War II, but reverted to Bridgestone in 1951. The company signed a technical assistance agreement with Goodyear in 1950. It marketed its first steel-belted passenger car radial in 1968. In 1983, Bridgestone acquired Firestone’s Nashville, Tenn., factory and began manufacturing in the United States. The company says it applies for more than 1,000 patents annually. It sells in 150 countries and manufactures in five.
