MERGERS: Love’s Labor Lost

Even though he made his millions from refrigerators, radios, scalp exercisers, bed coolers and sundry other gadgets, Powel Crosley Jr.’s first love was always the automobile. Seven years ago, the 6 ft. 4 in. Cincinnati millionaire decided to satisfy his passion. For $19 million he sold all his other interests to Aviation Corp. (now Avco), concentrated on making midget Crosley autos. His goal was to produce 150,000 cars a year, eventually bring the price down to $500. But Crosley fell far short of the mark.

Caught by rising costs, he could never bring the price below $800, and even then his profit margin was slim. Crosley production hit a high of 28,000 a year, then skidded. In the last three years, Crosley Motors, Inc. has lost $1 million a year; Powel Crosley has had to pour $3 million of his own money into the company to keep it going.

Last week, with his auto plant shut down, 65-year-old Powel Crosley finally threw in the towel. In a stock swap, he turned over 317,077 shares (58% control) to Akron’s General Tire & Rubber Co. for the equivalent of $63,400, or 20¢ a share. (Crosley stock, traded on the Curb, promptly fell nearly a point to 1½.) In partial payment of his $3 million loan, Crosley will keep $1.5 million worth of plant real estate, which he will lease back to the rubber company; the balance of the loan will be paid off with stock in a reorganized Crosley Motors.

Holy Cross to Broadway. What might a tire company want with Crosley? The answer lay in the amazing changes wrought in General Tire over the past few years by its president and founder, William Francis O’Neil, 66. A rough & ready graduate of Holy Cross, Bill O’Neil left his father’s New England textile mill in 1907, got a Firestone tire dealership in Kansas City, Mo. A friend suggested that he make tires and plug his “home talent” products in the vicinity. “I didn’t go for that home talent stuff,” O’Neil recalls. “I thought of home talent theatricals and decided we wanted to be on the Broadway of the rubber business.”

He forthwith moved to Akron and founded General Tire & Rubber. Instead of selling direct to automakers, O’Neil set off in hot pursuit of the replacement tire market. He quickly made General Tire the world’s fifth biggest rubber company, boosted sales to $44 million by 1941. Then, after first scorning the diversification of other rubber companies (e.g., Firestone’s hardware, Goodrich’s chemicals), O’Neil himself began to stretch out. He bought New England’s Yankee radio network for $1.3 million.

Tennis Balls to Jets. During the war, General Tire made military equipment ranging from gas masks to barrage balloons; at war’s end, it switched to tennis balls, hospital beds, washing-machine tubs and other civilian products. Bill O’Neil then bought control of California’s Aerojet Engineering Corp., maker of rockets and Jato (jet-assisted-take-off units) (TIME, Jan. 1, 1951). Last year, he snapped up the West Coast’s Don Lee radio network and the Mutual Broadcasting System, biggest in the nation.

With his new buy, O’Neil does not plan to make the same mistake that Powel Crosley made. He will not try to buck the auto market; instead, he will use the plant space for his booming defense business. And for all the diversification, O’Neil plans to keep General Tire in the business it knows best. Of its $171 million sales in 1951 (and $7 million net), 85% came from rubber.