The Eclipse of the U.S. Tire Industry
This paper undertakes an in-depth analysis of the tire industry over the period 1970-1990. It attempts to uncover the causes and consequences of the acquisition activity in the industry in the 1980’s, which resulted in all but one large U.S. tire manufacturer being sold to foreign companies. We do not find that ownership was acquired by firms more efficient at managing the existing plants. Nor were the takeovers undertaken in response to the failure of internal control systems to induce downsizing. The most likely explanation is that the acquisitions were driven by an increase in cross-border production and trade by automobile manufacturers. This increased the need for cross-border production by the tire manufacturers that, in a slow growth industry, could only happen through acquisitions. U.S. manufacturers became the natural targets of this wave of acquisitions because they had delayed investment in the radial technology and, thus, had high costs of staying in the industry.
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