The Gates Corporation traces its origins to 1911, when Charles Gates Sr. bought the Colorado Tire and Leather Company in Denver, Colorado.
Gates, born near Detroit, had originally headed west in 1904 after graduating from the Michigan College of Mining and Technology. (Houghton, Upper Peninsula of Michigan)
He took a job as a mining superintendent near Tin Cup, Colorado, but upon hearing of a gold strike in Nevada, he headed there and was hired as a mine engineer for the Nevada United Mines Company. In 1910, he settled in Denver, married, and started looking for a business to buy. The Denver Post's classifieds listed three companies for sale: a manufacturer of soap, a manufacturer of toilet paper, and a mail order company that sold tire covers. Charles, age 33, and his wife Hazel, bought the Colorado Tire and Leather Company for their entire combined savings of $3,500.
A few years later, Gates invented the V-belt, which revolutionized power transmission.
In the beginning, the company consisted of a small inventory of leather and rivets, a few rented machines, and a mail order office used to distribute leather tire covers. The company gradually replaced leather in its products with a new material – rubber. Rubber’s corrosion resistance and its flexibility, adhesion, temperature stability, and resilience made it ideal for tires, belts, hoses, and many other products. The company was renamed The Gates Rubber Company in 1918.
It became one of the world's largest family owned manufacturing enterprises. In 1920, Gates was elected president of the Denver Manufacturers' Association. He was an inventor and held numerous patents. He received the Distinguished Alumnus Award from Michigan Tech. He was awarded an honorary Doctor of Public Service degree by the University of Denver.
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The Colorado Tire and Leather Company consisted of a one-room shop with a typewriter and one 18-year old employee. The company's only product was the Durable Tread tire cover, a studded leather band that attached to the car tires to extend the life of the tires.
The former owner of the Colorado Tire and Leather Company had shown Gates stacks of invoices, promising a healthy profit every month. After buying the company, however, Charles found he had been tricked. The piles of invoices represented not one month but several months worth of orders, many of which were withdrawn when the company changed hands. Furthermore, the company had incurred a significant debt and along with the invoices were several bills. Undaunted, Gates managed to persuade his brother John, an engineer, to join the company too.
Although the tire covers proved a worthy product, only about 5,000 cars were in use in Denver in 1911. Gates was selling a product that had too small a local market for the company to survive, let alone thrive. The two brothers launched an aggressive sales campaign through direct mail to reach the automobile users back east. In eighteen months, the business had 18 employees and showed a profit of $200.
The power of advertising again helped Gates to expand its product line. The Colorado Tire and Leather Company became the largest halter manufacturer in the west after the Gates brothers persuaded Buffalo Bill Cody to try the horse halters the company made from leather scraps. Buffalo Bill's testimonial boosted sales, even though the halters cost twice as much as those of the competition.
Over the next few years, Gates introduced other new products, including car fan belts, blowout patches, and emergency boots for tires. But by 1914, a new material was being introduced into many products--rubber--and it was the perfect material for car tires, belts, and hoses because of its flexibility, adhesion, and durability. Gates abandoned leather tire covers and embraced the new technology, introducing retreads made of fabric and rubber.
Colorado Tire and Leather Company soon outgrew its rented space. The Gateses invested $15,000 in the construction of a small two-story building to accommodate the company. The second floor was used for halter production, and the first floor housed the company's offices and production facilities for the Half-Sole, a retread made of rubber fabric that could be cemented to a worn tire. The Half Sole became one of the company's biggest successes.
In 1917, the company's name was changed to the International Rubber Company to reflect its new direction. That year John Gates developed the first rubber and fabric V-belt for use in the automobile. His first version of this car part was made of twine dipped in rubber cement, coated with fabric, and vulcanized in a mold, providing a superior product to the simple, hemp rope then in use on car radiator fans. The V-belt would remain a mainstay of the Gates company.
Gates's company was busy during the first World War. The government classified the Half Sole as a priority product due to the rubber it conserved. After the war, however, the price of rubber dropped from $1.25 to 15 cents a pound, and the Half Sole protective cover became obsolete as tires became inexpensive to manufacture. In 1919, the Gates brothers were forced to develop a new product to take the place of the Half Sole, and the company began manufacturing balloon tires. That year the company was again renamed as The Gates Rubber Company.
During 1920 Gates faced several challenges. Economic recession left tire manufacturers with huge inventories of tires, which they had stockpiled because of the low cost of rubber, and now they were forced to cut prices and operating costs. Despite the poor economy, Charles Gates decided to market a new tire it had developed. The revolutionary Super Tread, so named because of its wider, heavier tread that increased mileage, was introduced during this time, and while tire sales dropped 35 percent nationwide, tire sales for the Gates company increased 40 percent in 1921. Meanwhile, Gates's company developed and marketed belts in 20 sizes to fit most cars on the market. The introduction of the car generator during this time caused sales of the Gates V-belt to nearly double. Towards the end of the decade, Gates introduced molded rubber goods such as hydraulic seals and also began manufacturing garden hoses and radiator hoses.
When the stock market crashed in 1929 and the economy plummeted, Gates managed to remain profitable. Moreover, the company increased its focus on marketing, putting more representatives out in the field to drum up business. The Gates Rubber Company weathered the Great Depression, and, in fact, by 1934, had 2,500 employees, annual sales of $13 million, and a position as the sixth largest rubber company in the United States. The company was manufacturing more than 4,000 rubber products, which Gates called "necessary accessories to essentials," items that people would need despite national events or the ups and downs of the economy.
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