(FORTUNE Magazine) – JACK WELCH never met Ivan W. Gorr. Welch is famous for demanding that each of General Electric's lines of business ranks No. 1 or No. 2 in market share. Cooper Tire & Rubber, of which Gorr is CEO, stands no better than ninth in its primary business -- manufacturing tires -- behind such behemoths as Goodyear, Michelin, and Bridgestone/Firestone. Yet Cooper consistently rolls up the best results in the industry. Among the FORTUNE 500 industrials, Cooper scores 28th in total return to investors -- stock appreciation plus dividends -- since 1980; GE comes in at No. 104. The last maker of passenger-car tires still left in Ohio, Cooper is based in Findlay, 125 miles west of Akron. It isn't even the biggest employer in Findlay (pop. 35,703); both Whirlpool and Marathon Oil have more workers. Getting attention isn't Cooper's style. Its low-rise corporate headquarters could pass for a 1950s suburban elementary school, right down to the linoleum floors and the flagpole out front. The annual report is printed in living black and white. Cooper prospers by mining ever deeper a single vein in a multifarious market. Alone among the major tiremakers, it refuses to compete for low-profit original-equipment sales to automakers. Instead, it concentrates on the replacement market, which is three times larger and growing faster because cars are more durable and owners keep them longer. Today's tires are tougher too, but replacement volume is holding up because people drive more than they used to. Rather than sell through its own retail chain like Goodyear and Bridgestone/ Firestone, Cooper distributes half its production as private-label merchandise through oil companies, large independent distributors, and such mass marketers as Western Auto Supply and Pep Boys. The other half goes to independent dealers, who account for 67% of replacement-tire sales. Those dealers love Cooper because it doesn't compete with them -- unlike Goodyear, for example, which besides having its own stores just agreed to let Sears sell its brand. Cooper's efficiency means that dealers get the highest gross profit margins in the industry -- 33%, vs. an average of 28% for competing brands. Cooper runs its plants at 100% capacity while others operate at about 80%. In a capital-intensive industry, that creates lots of leverage. The company also saves on R&D. Instead of pioneering its own designs, it often waits to see what sells well as original equipment. Says Gorr: ''All we have to do is produce the winners.'' Since new tires last up to four years, Cooper has ample time to produce its own version. (Car owners sometimes buy higher-rated tires when they replace the originals, but less frequently than in the past.) Occasionally a Cooper winner will last for years. For some military tires, the company has used the same molds since the 1950s. When Cooper wants to add capacity, it does so cheaply by buying old plants and retrofitting them. Its Tupelo, Mississippi, factory, formerly owned by now-defunct Mansfield Tire & Rubber, runs 24 hours a day, seven days a week. Cooper constantly seeks ways to improve. Says chief financial officer J. Alec Reinhardt: ''If you are making 20 million tires a year and you can take ten seconds out of the curing process, just think how much capacity you free up.'' At its plant in Texarkana, Arkansas, changes in materials flow and production scheduling mean that inventory gets turned ten times a year instead of three to five. Dedicated workers help. Says Gorr: ''We grow our talent and we motivate them with ownership, identity, and pride. The nonperformer leaves us very quick -- we see to that.'' At 62, Gorr, a former Arthur Young accountant, ranks as a newcomer because he has put in only 20 years. An innovative system of incentive pay reaches deep into the ranks. Executive compensation is tied to performance benchmarks and provides for cuts, as well as raises, of up to 30%. Hourly workers get paid extra for producing more. Salaried employees can earn bonuses of up to 7.5% based on the return on assets they work with. The stock rose an astonishing 6,800% during the 1980s, richly rewarding many longtime employees who have invested in the company. Take a worker who made $6,811 in 1965 and was earning $36,774 at the end of last year. Had he faithfully invested 6% of his salary in Cooper stock, matched by the company, he would own 43,807 shares worth $2.2 million. Cooper knows how to make a tough sale. Japanese automakers are among its growing number of customers for parts, which account for 15% of the company's business. All seven Japanese U.S. transplants buy Cooper hoses, window seals, engine mounts, or 1,000 similar components. Although the Japanese are notoriously picky, Reinhardt says, ''demonstrating our competence wasn't all that difficult.'' So while some 40 U.S. tire and rubber plants have closed since the 1970s, Cooper keeps rolling. Indeed, it is so strapped for capacity that it hasn't taken on new private-brand customers since 1985. Says Gorr: ''We have no designs on getting X share of the market. Our goal is return on equity and return on assets.'' Say hello, Jack Welch.

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