General Tire, Inc. History

Address:

One General Street
Akron, Ohio 44329-0012
U.S.A.

Telephone: (216) 798-3000
Fax: (216) 798-3170

Wholly Owned Subsidiary of Continental Aktiengesellschaft
Incorporated: 1915 as The General Tire & Rubber Company
Employees: 8,500
Sales: $1.4 billion
SICs: 3011 Tires & Inner Tubes

Company History:

General Tire, Inc., is a world leader in the manufacture and marketing of tires of all kinds and is a major exporter of tires around the world. A subsidiary of Continental Aktiengesellschaft (A.G.), Europe's second-largest tire and rubber manufacturer--and the fourth-largest in the world&mdash of 1987, General Tire constitutes the biggest and most important component of this German tire holding company.

On the eve of the twenty-first century, the worldwide tire and rubber industry was in the hands of five major producers. In the nineteenth century, long before the invention of synthetic rubber and only a few decades after the discovery of vulcanization, hundreds of rubber and tire companies vied with one another. A very unlikely city, Akron, Ohio, was dubbed the "rubber capital of the world" in the late nineteenth century, and it was in Akron that the General Tire and Rubber Company was established in 1915. It is one of the few original American tire companies to have survived to the present day.

The founder of the company, William F. O'Neil, was a native of the city, although he and his partner, Winfred E. Fouse, had first entered the rubber tire business in Kansas City, Missouri. In early 1909 O'Neil and Fouse pooled their capital and established the Western Rubber & Supply Company (renamed the Western Tire & Rubber Company in 1911), which only sold already made tires. Both partners, however, had bigger dreams; they were natives of Akron, where O'Neil's father, a wealthy merchant, agreed to give the two young entrepreneurs a loan in order to open a tire manufacturing business. In 1915 The General Tire & Rubber Company was launched. While O'Neil's father was president of the new company, William O'Neil, in the role of general manager, wielded most of the authority, and delegated little of it until his death in 1960.

Although there were hundreds of tire companies in the United States at the time, it was a propitious era for tires; in 1915 the number of passenger cars in the United States had surpassed two million, with one million produced in 1915 alone. In addition, World War I boosted the U.S. economy in almost all respects. Even the lower middle class by then could afford Model Ts. Because of more frequent blowouts, the vast majority of cars in those days came equipped with two spare tires, and the more expensive models even came with four spares. Hence business was more than ample for tire companies, and The General Tire & Rubber Company even turned out a profit in its first year of operation.

One year later, the company manufactured its first tire bearing the General name. It was the first oversize tire on the market, especially fitted for passenger cars. No stranger to advertising, O'Neil paid $5,000 in 1917 to the prestigious Saturday Evening Post for a full page ad introducing his new tire. While large scale national advertising was common, it was highly uncommon--for a tire company at least&mdashø appeal to individual car owners rather than to the car manufacturers in Detroit. O'Neil's was an innovative marketing approach, and it worked. Franchised tire dealerships became crucial to the success of the General Tire & Rubber Company. The company also initiated the concept of trading in used tires for a complete set of "Generals," as the tires were dubbed.

The growing importance of trucks and their particular tire needs did not escape the company's notice. Almost from the outset of its existence, truck tires became a specialty. The General Tire & Rubber Company pioneered the recapping of truck tires and came out in the 1930s with a series of low-pressure truck tires. By 1934 the company's research and development specialists had experimented with a revolutionary new "drum method" for producing truck tires that dramatically slashed the cost of manufacturing them and at the same time accelerated the speed at which they were manufactured by 50 percent. Without the "drum method" of truck tire production, the tremendous wartime demand for tires would not have been met. In 1940 The General Tire & Rubber Company produced the largest truck tire in the world.

In 1923, only eight years after General Tire's establishment, it had earned its first million dollars in sales after taxes (forty years later, the company would achieve its first billion dollars in sales). Its product innovations continued apace. The company had already come out in 1920 with its "General Jumbo" low pressure tire, which became a great success with car owners because of its superior mileage and maneuverability. In the late 1920s and throughout the financially difficult years of the Great Depression, General Tire not only pioneered in the development of truck tires, but entered the airplane tire business and continued to churn out new automobile tires, such as the Dual 8, the Dual 10, and the Squeegee. The company had acquired its first subsidiary in Mexico, and was exporting its tires throughout the world. Despite these signs of vigor and the fact that the 1930s witnessed the biggest vehicle registration in history--surpassing the 100 million mark by the mid-1930s--the company made no profit throughout most of the decade. Its survival alone had to stand as testimony to its vitality.

The survival years of the Depression gave way to prosperity during World War II. The dearth of natural rubber and the initial poor quality of synthetic rubber, however, hindered General Tire's profit potential. There was virtually a halt to all civilian automobile tire production, and many smaller tire companies were closed by the government or turned into munitions plants. While The General Tire & Rubber Company continued to function, the company built a munitions plant in Mississippi and operated it for the duration of the war. It also fulfilled other wartime requests, including building intricate pontoon bridges and improved gas masks.

At the beginning of the war, with founder O'Neil still at the helm, the company had ventured outside the tire business by purchasing a 50 percent interest in the Pasadena, California-based Aerojet Engineering Corporation, which would become Aerojet General in the near future. This purchase marked the onset of an explosion of growth and diversification at the end of the war, which, among other distinctions, would make General Tire the country's biggest private radio and television owner by 1960.

The postwar years heralded great prosperity for General Tire. As for the tire business, the company began to supply General Motors, hence entering the new car or "original equipment" market in a significant way (it had already entered the original equipment market for trucks in the 1930s, as a supplier for International Harvester). Plant expansion was initiated: in 1959 the world's largest tire test track was completed in Uvalde, Texas; in 1967 the company's fourth tire plant in Bryan, Ohio, was completed, followed in 1973 by the construction of a radial tire manufacturing facility in Mt. Vernon, Illinois. William O'Neil did not live to see the company reap its first billion dollar sales in 1963. By then, however, he had witnessed radical changes in his company.

In the postwar years, The General Tire & Rubber Company gradually ceased to be exclusively a tire manufacturer and marketer. It entered the entertainment business, followed by tennis ball, wrought iron, and soft drink production, as well as chemicals and plastics manufacturing; in the early 1980s General Tire even began motion picture and video production. The identity of the company had altered so drastically that by 1984, the shareholders agreed to change the name and transform the company into a holding company consisting of four major subsidiaries. General Tire, Inc., emerged as the tire manufacturing entity, a separate corporation operated independently. GenCorp, Inc., would be the name of the new parent company.

The formation of General Tire, Inc., in a sense signaled a return to the original identity and purpose of The General Tire and Rubber Company. With subsidiaries in Canada (closed in 1991) and Mexico (sold in 1993), it was the fifth major tire company in North America, consisting of six manufacturing facilities, a tire fabric processing plant, and the giant Uvalde, Texas, tire test center, the largest in the world.

In 1987 GenCorp underwent large-scale restructuring, in part to ward off a hostile takeover attempt by General Acquisition, Inc. When one of Europe's largest tire manufacturers, Continental Aktiengesellschaft of Hanover, Germany, became interested in the possibility of purchasing General Tire, the shareholders of GenCorp were more than willing to sell.

Continental is one of Europe's oldest tire manufacturing companies, and the first tire company in the world to develop--in 1904--tires with treads. Flush with capital from one of its most successful years, Continental was determined to broaden its market base, which was largely domestic. The acquisition of General Tire, Inc., would give Continental a firm foothold in North America. In June of 1987 General Tire was sold to the German tire group for $628 million, thereby transforming Continental into the fourth-largest tire company in the world. Gone, possibly forever, were the days when hundreds of tire companies could profit by serving the same domestic market. In the 1990s more than 80 percent of the tires sold worldwide are produced by five major tire companies, only one of which, Goodyear, is American.

The result of General Tire's purchase was an overall revitalization. The company was downsized--its Canadian plant was closed, a retail chain was sold, and the number of employees decreased by 20 percent--and restructured into three major business units. Unfortunately, the huge cost of restructuring was barely recouped when the recession of the early 1990s took its severe toll on the company. Under Chief Executive Officer Alan L. Ockene, the company weathered the recession as it had, decades earlier, the even severer Great Depression. By 1993, the company had broken even and introduced such innovative new tire products as the Hydro 2000, a premium, all-weather tire designed to provide optimum performance on wet roads and the Genseal tire, which repairs itself of minor punctures. Both new products are ultra-premium tires that cater to the more affluent customer, to whom General Tire's new products will increasingly be marketed. In 1991, at the height of the recession, Ford Motor Company distinguished General Tire with its TQE (or top quality) Award, which only twelve of Ford's 4,000 tire suppliers received that year.

Even with the dominance of the world tire market by a handful of companies, the future of the tire and rubber industry is precarious. Competition is extremely intense, the cost of labor keeps escalating, and environmental demands are increasing. Recycling of the mountains of used tires generated by tire manufacturers in an environmentally acceptable manner, installing expensive emission controls in factories, and developing "energy saving" tires were some of the concerns of General Tire in the early 1990s.

There is, however, great potential in specialized tires, including the self-sealing automobile tire, bicycle tires, wet-weather driving tires, or the "energy saving" automobile tire. Manufacturing specialized tires has always been General Tire's strength. The truck tire, which the company pioneered from the outset, is another specialized product that performs well on the market.

Successful restructuring and downsizing, coupled with General Tire's traditional strengths in specialized tires, held the possibility of making the company a formidable competitor in international markets. In the early 1990s it was already the largest component of the giant and highly successful German tire and rubber manufacturer Continental A.G. More so than any other tire company in the world, including the world's largest, Michelin, Continental has made inroads into the newly opened Eastern European and Russian markets, which promised to be extremely lucrative in the twenty-first century.

General Tire, Inc. History

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