BANDAG AUTOMOTIVE: CASE STUDY

Bandag Automotive: Case Study

Bandag Automotive: Case Study

Introduction

Bandag, Inc. is the premier supplier of rubber utilised by its franchisees for the retreading of exhausts, mostly for motor trucks and buses. The business manufactures procured tread rubber, gear, and provision for the retreading of exhausts by means of a patented "cold" bonding process. Throughout the early 1990s Bandag outstripped 31 other automotive parts businesses in profitability, with a five-year average come back on equity of 30.2 percent. The business and its licensees had 1,383 franchisees worldwide in more than 120 countries in 1996.

Bandag Automotive: Case Study

Roy J. Carver of Muscatine, Iowa, was the proprietor of a family constructing firm entitled Carver Pump Co. When, on a enterprise trip to West Germany in 1957, he wise about the "cold-cure" tire-retreading process created by Bernhard Nowak. This process healed tire treads in one step and bonded them to old exhaust casings in another step. Because it employed temperatures smaller than those utilised in other retreading methods, the casings were less expected to be damaged, thereby permitting durability greater than that of conventional recaps and therefore chopping cost per mile. Carver, who had learned the tire business by changing flats in his father's shop, was an entrepreneur willing to take a flyer on any number of schemes, and he bought the U.S. privileges to the method from Nowak. The Bandag name combined Nowak's initials (BAN) with "D" for his home town (Darmstadt) and "AG" for the German abbreviation for "incorporated." (It also, probably not coincidentally, approximated "bandage (Gray, 2005).")

Back in Muscatine, Carver opened Bandag in a dilapidated former sauerkraut plant. He discovered that, granted the common troubles with a start-up business, especially one engaging mechanical innovations; exhaust retreading was no very simple street to riches. Carver almost bankrupted the family propel business to develop the Nowak procedure commercially. "More than one time it was a case of 'get some cash or bend camp,"' a company executive subsequent told a Financial World reporter. This man remembered inquiring suppliers for borrowings payable with notes that altered to Bandag supply, adding that those who held on to the notes eventually became millionaires.

One technical difficulty was finding a way to request uniform force on exhaust casings when retreads were being bonded to them. Carver himself came up with a answer by inventing a flexible rubber envelope capable of fitting over tires of any dimensions. Another problem was solved when his research-and-development technician formulated a more productive rubber-gum mixture to restore the bonding cement holding simultaneously the casing and retread. Carver received U.S. patents on the cold-recapping method throughout 1961-1962.

By fiscal 1963 (ending May 31, 1963) Bandag had turned the corner to profitability, earning $32,024 in snare earnings on snare sales of $1,910,187. These numbers increased steadily, and by 1968, when the company went public, its facilities included three plants in Muscatine and a fourth in Shawinigan, Quebec. In that year Bandag had snare earnings of $1.3 million on snare sales of ...