During the Korean War Kelsey-Hayes produced parts for the aircraft industry. They also promoted specialty products for the automobile industry such as chrome-plated and aluminum wheels. In 1958 the company's research and development department began looking into anti-lock brake systems (ABS) for automobiles—prior to this, the ABS was only used in aircraft. With so much diversification of its product line, Kelsey-Hayes Wheel Company saw fit to change its name to Kelsey-Hayes Corporation in the late 1950s.
The company continued to broaden its product line beyond wheels; in the years that followed, the biggest successes were in non-wheel products. Kelsey-Hayes pioneered disc brake systems—standard equipment on Lincoln Continentals and Thunderbirds in the 1960s. But by the 1970s eighty-five percent of U.S. cars were equipped with Kelsey-Hayes disc brakes. Also at that time, nearly every jet engine contained some parts manufactured by the Kelsey-Hayes Corporation. During and after an oil crisis in the 1970s, the market demanded smaller cars that would be cheaper to operate. Kelsey-Hayes took researched and designed new components that would be lighter and more economical. Fewer people were buying new cars during this period; instead, they opted for used ones. Kelsey-Hayes sensed this and in 1978, as new automobile sales declined, they began manufacturing replacement parts.
In spite of these successes Kelsey-Hayes' stock was falling and its credit was overextended during the early 1970s. There was fear of a takeover; in 1973 the company became a subsidiary of Fruehauf Corporation. Kelsey-Hayes quickly recovered from its financial setback and consistently brought Fruehauf its best profits. In the late 1970s Kelsey-Hayes acquired Compositek Engineering Corporation whose history of producing fiber-reinforced plastics brought new opportunities for producing light-weight wheels. At the end of the decade Kelsey-Hayes was producing all types of wheels. The merger did not appear to diminish Kelsey-Hayes' success.
The Federal Trade Commission, however, (FTC) reviewed Fruehauf's acquisition of Kelsey-Hayes and decided that the merger violated anti-trust laws by discouraging competitive trade. Kelsey-Hayes had been a supplier to Fruehauf and, after the merger, Fruehauf was less inclined to buy from other suppliers. The FTC ruled that this was a restraint of trade. Also, prior to the merger, Fruehauf had itself manufactured products similar to those that Kelsey-Hayes produced. After the merger, Fruehauf had discontinued its own production of those products, and the FTC ruled that this was a limit on the diversity of available goods. Fruehauf was forced to divest itself of some of its Kelsey-Hayes holdings.
The problems for Fruehauf did not end there. Fruehauf was dismantled during a lengthy, unfriendly takeover in the mid-1980s. Kelsey-Hayes was independent again and was renamed the K-H Corporation. But K-H was short-lived, since debt and interest payments diminished any possibility for growth. In 1989 K-H sought out the Toronto-based Varity Corporation and arranged for a friendly buyout. Under this new owner the company became the Kelsey Hayes Group of Companies, and by organizing itself into business units, the company made it easier to focus on distinct product lines. One year after the merger Kelsey-Hayes showed $1 billion in revenues.
The Kelsey-Hayes story is about a company in the midst of a competitive environment that was able to survive and build itself up by furnishing the parts needed by big customers like General Motors, Ford, and U.S. government contractors. Although other parts suppliers tried to do the same thing, Kelsey-Hayes was successful because of its ability to read the market and to develop new products that were ahead of their time. The company also understood its limits and subsequently built relations with other companies, either by purchasing or merging. Such strengths contributed to Kelsey-Hayes' ability to issue innovative parts, such as aluminum wheels, disc brakes, and anti-lock braking systems—quite a change from the days of the wooden wheel.