Tue Dec 16 15:36:09 EST 1997
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EH-NET BOOK REVIEW
Published by H-Business at eh.net (December, 1997)
Mansel G. Blackford and K. Austin Kerr. _BFGoodrich: Tradition and
Transformation, 1870-1995_. Columbus: Ohio State University Press,
1996. x + 507 pp. Tables, photographs, appendices, notes, and index.
$30.00 (cloth), ISBN 0-8142-0696-4; unreleased (paper), ISBN 0-8142-
0697-2.
Reviewed for H-Business by Kenneth L. Simons, Royal Holloway,
University of London <k.simons at rhbnc.ac.uk>
Insights from an American Industrial Experience
Blackford and Kerr's history of B.F. Goodrich traces the development of
the company as it produced a changing range of products from 1870 to
1995. Through this history, the authors provide insights into
several universal themes about industrial competition and
organization of American manufacturers in the 1900s. Blackford and
Kerr make no attempt to generalize conclusions beyond the experiences
of Goodrich, but merely provide scholarly descriptions of the
company's history in a way that addresses the universal themes.
In American manufacture of automobile tires, B.F. Goodrich became the
first producer when in 1896 it filled an order from the Winton
Automobile Company of Cleveland. As automobile production expanded,
Goodrich was well-placed to stay a leader in this profitable new
market by branching out from bicycle tires and other rubber products
into automobile tires. The company licensed key tire patents and
helped set up the Clincher Tire Association and its system of
production quotas. Yet the quotas spurred manufacturers with low
allocated sales to develop alternative technologies. Worse, Goodrich
management lagged in tire plant investment and improvement. By 1916,
competitor company Goodyear surpassed Goodrich with a 21% market
share in automobile tires, and Firestone too surpassed Goodrich by
the mid-1920s. Although Goodrich hung on among the industry's "big
four", its relative inattention to manufacturing meant that, from the
1920s on, high costs often plagued profits in the company's tire
operations. After World War II, despite sporadic major investments
in tire manufacturing, profits remained elusive. In 1988, Goodrich
sold its tire interests.
The company had other products to rely on, some in lucrative growth
markets. After tires, a second key product was polyvinyl chloride,
PVC. In experiments to improve the bonding between metal and rubber,
company scientist Waldo Semon in 1926-1927 stumbled on a means to
turn the polymer of vinyl chloride into a flexible, jellylike
plastic. Managers did little to commercialize plasticized PVC until
the late 1930s. World War II highlighted PVC's advantages, as the
military funded rapid construction of production facilities. A key
initial use was the coating of electrical wires and cables. By
around the end of the war, Goodrich apparently had a capacity to
produce annually over 10 million pounds of PVC. By 1966, Goodrich's
output reached 260 million pounds, and by 1971, 456 million pounds.
Other firms also produced PVC, including Union Carbide by 1941, but
through 1955 the firms involved reaped high profits through "unspoken
agreements to maintain prices" (p. 236). Goodrich did not attempt to
bar competitors from the market using patents; in any case
alternative patents could easily be gained via minor chemical
variations. In 1955, Dow Chemical began selling a key raw material
that previously had to be produced as part of the PVC manufacturing
process. Entry of new producers yielded twenty manufacturers by
1958, and prices plummeted. The easy flood of PVC profits ceased,
although Goodrich managed to maintain less striking profits by
pioneering new uses for PVC and by developing the industry's lowest-
cost production facilities. Nonetheless, PVC as a commodity chemical
became less attractive as a continuing line of business, and Goodrich
sold most of its PVC operations in 1993.
Such juggling of product markets was typical for Goodrich, which
began its existence in 1870 as a diversified rubber producer. By
1902 it produced rubber items such as bicycle tires, tubes and hoses,
molded goods, druggist sundries, golf balls, and conveyor belts.
>From its work on chemical additives (to make rubber longer-lasting
and quicker to produce), synthetic rubber, and new means to use
rubber, the company developed a range of chemical products that led
to the formation in 1942 of a separate chemical division, and its
reorganization as a wholly owned subsidiary in 1945. Provision of
airplane tires, brakes, and other equipment beginning in 1909 led to
a small aeronautics department in 1917, and eventually to an
aerospace division. In addition to expanding internally, the company
purchased firms in strategically related markets or with
strategically key technologies. Especially from the 1970s on,
executives used divestitures and acquisitions to reshape the company.
In the 1980s and 1990s, Goodrich shed its mature markets, notably
rubber products and PVC, in favor of two high-growth areas involving
materials science: specialty chemicals and aerospace. The authors
trace Goodrich's growing pains, organizational change and continuity,
and managerial strategy as the company mutated through different
markets over time.
Other themes that recur at various points throughout the book include
price collusion and antitrust investigation, reasons for and
consequences of laboratory research, difficulties in capturing the
monetary returns to important product improvements and patents,
strategies in developing distribution networks, influence of
personalities on corporate strategy and change, labor unions and
strikes, and the thwarting of takeover attempts. These themes may
not be addressed as deeply as many readers would like, and clearer
thesis statements about them, and comparisons with typical American
industrial experience, might have helped the authors focus their
information gathering and presentation. However, the authors perhaps
can be forgiven these weaknesses, since desirable information may be
difficult or impossible to obtain. Moreover, the Goodrich story
often provides thought-provoking insights on these themes.
A startling insight of this sort is the role of US firms' infighting
over the new radial tire technology in contributing to those firms'
loss of market share to Michelin and other foreign competitors. When
Goodrich realized through European subsidiaries that Michelin's
radial tire was an important advance, Goodrich developed its own
version of the radial. However, its major competitors Goodyear and
Firestone were not ready to produce radials. Goodyear characterized
radials as being problematic and promoted its own "bias/belted" tires
to customers, thus slowing development of radial sales in the US;
moreover, major automakers would not install radials as original
equipment on cars unless at least two large manufacturers could
supply them. As a result the US manufacturers held back from
investments in radials. Also, Goodrich blocked attempts by Goodyear
to purchase firms in Holland and New Zealand that would have given
radial technologies to Goodyear; again US tire makers' move into
radials was slowed. Earlier investments in radials could have helped
defend against international competition by radial makers that
eventually cut deeply into US firms' sales.
One issue that is little addressed is the relative importance of in-
house engineering work versus the purchase of equipment in lowering
firms' manufacturing costs. Blackford and Kerr portray Goodrich's
profitability troubles in automobile tires as resulting, seemingly
most importantly, from its laggardliness in improving manufacturing
processes. This portrayal seems reasonable given others' findings on
the subject [1]. However, the authors come across as implying that
lowering costs was mainly a matter of purchasing new equipment, and
they do not analyze the relative proportion of in-house engineering
work required for cost reduction. (They do mention a specific case,
converting tire building machines for radial tires, in which in-house
conversion of equipment seems to have been less appropriate than
purchasing new equipment. Nonetheless, this does not demonstrate
that in-house engineering work was the less promising approach at
other times or for other aspects of the manufacturing process, and it
stills leaves open the question of engineering costs required to
learn about and install equipment from suppliers.) Hard evidence
about the size and activities of production engineering and related
workforces is difficult to come by, so the contribution to cost
reduction of equipment purchases versus in-house engineering remains
an open question in economic and historical research.
The book is organized not by themes of this sort, but by chapters
corresponding to historical eras, with subdivisions into a lengthy
string of product categories. This layout is more prolonged than
many readers will care to bear. Fortunately, the subheadings and
index provide a means to investigate product markets and some key
themes by reading selected chapters. And to their credit, the
authors manage to write most of the subsections in a way that invites
interest. In occasional instances, ambiguities make readers
uncertain about what to believe (e.g., how specifically might
Goodrich's 1954 acquisition, the Sponge Rubber Company, have begun
"to fail in the face of management controls imposed from Akron", p.
225; in what manner did Goodrich's 1971 divestitures of various
rubber products and of its subsidiary Motor Freight cost "about $10
million", p. 301). But such ambiguities are rare, a tribute to the
care with which the book was written.
The research throughout appears scholarly and unbiased. Blackford
and Kerr enjoyed full access to Goodrich's company archive, record
books from executive meetings, and other sources. Of course, they
also draw on relevant books, trade journals, archives, and
interviews. BFGoodrich funded their research, and the company's
chairman and CEO John Ong commented on drafts at the authors'
request, but Ong stressed to them that "the decision about what to
say in the book was [the authors'], and [the authors'] alone" (p.
ix). Publication via Ohio State University Press apparently was a
mandate of the project.
Blackford and Kerr's _BFGoodrich_ is likely to interest not only
persons concerned with BFGoodrich, and not only business historians,
but also academics concerned with industrial organization economics,
corporate strategy, and organizational studies, plus management
practitioners more broadly. It could provide an interesting catalyst
for discussion if used as a course text. More importantly, it is a
catalyst for all readers to reflect on important themes of industrial
experience.
Note:
1. For a general overview of factors affecting competition in US tire
manufacturing, see French [1991]. Excellent early studies of labor
productivity improvements in US tire manufacturing, and their
correlation with the installation of new equipment, are by Gaffey
[1940] and Stern [1933]. Regarding the nature of technological
changes taking place in the tire industry's manufacturing processes,
and their relation to firms' profits and survival, see especially
Warner [1966] and Klepper and Simons [1997].
References:
French, Michael J. _The U.S. Tire Industry_. Boston: Twayne
Publishers, 1991.
Gaffey, John D. _The Productivity of Labor in the Rubber Tire
Manufacturing Industry_. New York: Columbia University Press, 1940.
Klepper, Steven, and Kenneth L. Simons. "Technological Extinctions
of Industrial Firms: An Enquiry into their Nature and Causes."
_Industrial and Corporate Change_, vol. 6 no. 2, 1997, pp. 379-460.
Stern, Boris. _Labor Productivity in the Automobile Tire Industry_.
Bureau of Labor Statistics Bulletin 585, Washington, D.C., US
Government Printing Office, 1933.
Warner, Stanley L. _Innovation and Research in the Automobile Tire
and Tire-Supporting Industries_. PhD dissertation, Harvard
University, 1966.
Copyright (c) 1997 by EH.Net and H-Net, all rights reserved. This work
may be copied for non-profit educational use if proper credit is given to
the author and the list. For other permission, please contact
review.editor at eh.net. (Robert Whaples, Book Review Editor, EH.Net.
Telephone: 910-758-4916. Fax: 910-758-6028.)
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