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Jewish World Review June 4, 2001 / 14 Sivan, 5761

Amity Shlaes

Amity Shlaes
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Consumer Reports

When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful -- What made Firestone do it? That was the question that came to mind when the tyre-maker broke off its century-old relationship with Ford. It was clear why Ford might want to move on. The car company is desperate to control the damage of its sports utility vehicle (SUV) disaster.

But it was not so clear why Firestone would take action. After all, the break-up is more likely to hurt Firestone and its parent, Bridgestone, than to hurt Ford. It is hard to imagine how Firestone, which sells about a fifth of US tyres, can thrive without its big customer. (The recent dip in Bridgestone's share price shows that markets are also concerned.) What is more, Ford insisted - in public, at least - that it did not want to push out its old partner. "We did not plan any draconian action," said William Ford Jr last week.

Many corporations would have taken Ford's official position as an opportunity to grovel. Not Firestone. Instead, John Lampe, Bridgestone/Firestone's US chief executive, fired off a "Dear John" letter. "Business relationships, like personal ones, are built on mutual respect," he wrote. "We have come to the conclusion that we can no longer supply tyres to Ford since the basic foundation of our relationship has been seriously eroded." Mr Lampe's aggrieved tone seems disconcerting, given that he was supposedly talking about business, not marriage.

Except that he was talking about marriage, or a kind of marriage, says Nancy Koehn of Harvard Business School. The Ford/Firestone split might have appeared to be about responsibility for those troubling SUV accidents, says Ms Koehn, the author of a book on loyalty and corporations, Brand New: How Entrepreneurs Earned Consumers Trust from Wedgwood to Dell.

But it was really about something more: a relationship as hot - and as idealistic - as a personal one. "There are lots of examples of loyalty between companies that is not purely transactional," she says. Such business marriages usually begin with friendship between the founders of great companies - and a firm business purpose. (Ford/Firestone was born when Harvey Firestone sold four tyres to Henry Ford for his Quadricycle.)

Soon the arrangement expands beyond business. Eventually, says Ms Koehn, these partnerships can come to have an outsized importance for both companies - so great, in fact, that the partners will forgo business opportunities elsewhere. And, inevitably, like marriages between people, business marriages do end - through the death of a partner, because of the action of a powerful interloper, or in fiery scenes like the one staged by Firestone.

The marital analogy is not perfect but it does shed light on some old corporate history.

Consider the partnership of Wedgwood & Bentley and Boulton & Fothergill in 18th-century England. Wedgwood & Bentley made the consumer earthenware that is the forerunner of the Wedgwood we know today. Boulton & Fothergill was established by Matthew Boulton, England's great pioneer in the use of iron and metalware. The companies teamed up to make buckles, buttons, vases and brooches - Wedgwood & Bentley crafting the pottery component and Boulton supplying the metal casings and frames. Both Josiah Wedgwood and Matthew Boulton, Ms Koehn relates, forwent other opportunities to preserve their relationship.

"Matthew Boulton could have made vases on his own but he did not," she says. Only the death of Wedgwood ended the link.

Then there was the relationship - perhaps more liaison than marriage - between Marshall Field, the mighty Chicago merchant, and Alexandre Napoleon, a smaller French company. Back in the 1860s the retailer saw that the city's nouveaux riches craved European goods to confirm their social status. Kid gloves made by Alexandre Napoleon proved to be just the job. By the 1880s Marshall Field, the department store, had become such a colossus that it could have dallied with cheaper suppliers, says Ms Koehn. But it remained true to Alexandre Napoleon, demanding only the exclusive right to its merchandise.

Next there was Dupont and General Motors, another car industry pair. According to Randall Kroszner of the University of Chicago, Dupont supplied paint, varnish and artificial leather to the carmaker. It also held many GM shares. By the late 1940s the relationship had become so close that the US antitrust authorities demanded a divorce.

Another example of divorce - call this one a "good divorce" - involved Henry Clay Frick and Andrew Carnegie. Frick supplied coke for Carnegie's steel; the two men became allies. Eventually, Frick went to work at Carnegie Steel. Like the Firestone/ Ford break-up, this split was apparently triggered by a catastrophe. When labour troubles arose, Carnegie stomped off to Europe, leaving Frick, his plant manager, to manage the 1892 Homestead strike. Frick hired Pinkerton security hands, who fired on the protesters (the workers were also violent). Frick and Carnegie blamed each other and eventually Frick left. But he took with him a sizeable settlement in the form of equity - sufficient to leave legacies such as the Frick art collection.

The marital model is useful when it comes to cases such as that of Firestone. One might posit that the break-up was overdue, since Harvey and Henry died long ago. Or one could look at the split in terms of an emotional dynamic: after all the blame that Ford unloaded on Firestone, it probably felt good to post that break-up letter. Like a divorcing spouse, the company may have decided that anything was better than the awful status quo.

Alas for Firestone, in this instance, that may not be the case.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


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© 2001, Financial Times