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On August 9, 2000, Bridgestone/Firestone Inc.
announced it would recall more than 6.5 million tires, most of which had been
mounted as original equipment on Ford Motor Co. Explorers and other Ford light
trucks. Bridgestone/Firestone had become the subject of an intense federal
investigation of 46 deaths and more than 300 incidents where Firestone tires
allegedly shredded on the highway. The Firestone tires affected were 15-inch
Radial ATX and Radial ATX II tires produced in North America and certain
Wilderness AT tires manufactured at the firm's Decatur, Illinois, plant. This
tire recall was the second biggest in history, behind only Firestone's recall
of 14.5 million radial tires in 1978. The 1978 tire recall financially crippled
the company for years to come and the August 2000 recall threatened to do the
same. Consumers, the federal government, and the press wanted to know: Why
didn't Ford and Firestone recognize this problem sooner? Let us look at the
series of events surrounding the tire recall and the role of information
management.
1988---Financially weakened from its 1978 tire recall, Firestone agreed to
be acquired by Bridgestone Tires, a Japanese firm. To increase its sales,
Firestone became a supplier of tires for Ford Motors' new sport-utility vehicle
(SUV), the Explorer.
March 11, 1999---In response to a Ford concern about tire separations on
the Explorer, Bridgestone/Firestone (Firestone) sent a confidential memo to
Ford claiming that less than 0.1 percent of all Wilderness tires (which are
used on the Explorer) had been returned under warranty for all kinds of
problems. The note did not list tire separations separately but did say this
"rate of return is extremely low and substantiates [Firestone's] belief
that this tire performs exceptionally well in the U.S. market."
August 1999---Ford Motors announced a recall in 16 foreign
countries of all tires that had shown a tendency to fail mainly because of a
problem of tread separation. The failures were primarily on the Ford Explorer,
and the largest number of tires recalled was in Saudi Arabia. Firestone
produced most of the tires. (A year earlier, Ford had noted problems with tread
separation on Firestone tires mounted on Explorers in Venezuela and had sent
samples of the failed tires to Bridgestone for analysis.) Ford did not report
the recall to U.S. safety regulators because such reporting was not required.
May 2, 2000---Three days after another fatal accident involving
Firestone/Ford Explorer tread separations, the National Highway Transportation
Safety Administration (NHTSA) opened a full investigation into possible defects
with the Firestone ATX, ATX II, and Wilderness tires. The agency listed 90
complaints nationwide, including 34 crashes and 24 injuries or deaths. NHTSA
also learned of the foreign recalls.
August 2000
August 9---At a news conference, Firestone announced that it
would recall about 6.5 million tires that were then on light trucks and SUVs
because they had been implicated in more than 40 fatalities. The company said
it would replace all listed tires on any vehicle regardless of their condition
or age. Firestone said it continued to stand by the tires. One Japanese analyst
estimated the recall would cost the company as much as $500 million.
Firestone emphasized the importance of
maintaining proper inflation pressure. Firestone recommended a pressure of 30
pounds-per-square-inch (psi), whereas Ford recommended a range of 26 to 30 psi.
Ford claimed its tests showed the tire performed well at 26 psi and that the
lower pressure made for a smoother ride. However, Firestone claimed
underinflation could put too much pressure on the tire, contributing to a
higher temperature and causing the belts to separate. Ford pointed out that,
although NHTSA had not closed its investigation, the two companies did not want
to wait to act. NHTSA had by now received 270 complaints, including 46 deaths
and 80 injuries, about these tires peeling off their casings when Ford SUVs and
some trucks traveled at high speeds.
August 10---Press reports asked why Ford did not act within the
United States when it took action to replace tires on more than 46,000
Explorers sold overseas.
August 13---The Washington Post reported that the
Decatur, Illinois, Firestone plant, the source of many of the recalled tires,
"was rife with quality-control problems in the mid-1990s." It said,
"workers [were] using questionable tactics to speed production and
managers [were] giving short shrift to inspections." The article cited
former employees who were giving testimony in lawsuits against Firestone.
August 15---The NHTSA announced it had now linked 62 deaths to
the recalled Firestone tires. It also had received more than 750 complaints on
these tires.
September
2000
September 4---The U.S. Congress opened hearings
on the Firestone and Ford tire separation problem. Congressional investigators
released a memo from Firestone to Ford dated March 12, 1999, in which Firestone
expressed "major reservations" about a Ford plan to replace Firestone
tires overseas. A Ford representative at the hearing argued it had no need to
report the replacement program because it was addressing a customer
satisfaction problem and not a safety issue. The spokesperson added, "We
are under no statutory obligations [to report overseas recalls] on tire
actions."
Ford CEO Nasser testified before a joint
congressional hearing that "this is clearly a tire issue and not a vehicle
issue." He pointed out that "there are almost 3 million Goodyear
tires on Ford Explorers that have not had a tread separation problem. So we
know that this is a Firestone tire issue." However, he offered to work
with the tire industry to develop and implement an "early warning
system" to detect signs of tire defects earlier, and he expressed
confidence this would happen. He said, "This new system will require that
tire manufacturers provide comprehensive real world data on a timely
basis." He also said that in the future his company would advise U.S.
authorities of safety actions taken in overseas markets and vice versa.
Nasser said his company did not know of the
problem until a few days prior to the announcement of the recall because
"tires are the only component of a vehicle that are separately
warranted." He said his company had "virtually pried the claims data
from Firestone's hands and analyzed it." Ford had not obtained warranty
data on tires the same way it did for brakes, transmissions, or any other part
of a vehicle. It was Firestone that had collected the tire warranty data. Ford
thus lacked a database that could be used to determine whether reports of
incidents with one type of tire could indicate a special problem relative to
tires on other Ford vehicles. Ford only obtained the tire warranty data from
Firestone on July 28. A Ford team with representatives of the legal,
purchasing, and communication departments; safety experts; and Ford's truck
group worked intensively with experts from Firestone to try to find a pattern
in the tire incident reports. They finally determined that the problem tires
originated in a Decatur, Illinois, plant during a specific period of production
and that the bulk of tire separation incidents had occurred in Arizona,
California, Texas, and Florida, all hot weather states. This correlated with
the circumstances surrounding tire separations overseas.
Firestone's
database on damage claims had been moved to Bridgestone's American headquarters
in Nashville in 1988 after Firestone was acquired by Bridgestone. The firm's
database in warranty adjustments, which was regularly used by Firestone safety
staff, remained at Firestone's former headquarters in Akron, Ohio.
After the 1999 tire recalls in Saudi Arabia
and other countries, Nasser asked Firestone to review data on U.S. customers.
Firestone assured Ford "that there was no problem in this country,"
and, Nasser added, "our data, as well as government safety data, didn't
show anything either." Nasser said Ford only became concerned when it
"saw Firestone's confidential claims data." He added, "If I have
one regret, it is that we did not ask Firestone the right questions
sooner."
September
8---The New York
Times released its own analysis of the Department of Transportation's
Fatality Analysis Reporting System (FARS). FARS is one of the few tools
available to government to independently track defects that cause fatal
accidents. The Times found "that fatal crashes involving Ford
Explorers were almost three times as likely to be tire related as fatal crashes
involving other sport utility vehicles." The newspaper's analysis also
said, "The federal data shows no tire-related fatalities involving
Explorers from 1991 to 1993 and a steadily increasing number thereafter which
may reflect that tread separation becomes more common as tires age."
Their
analysis brought to light difficulties in finding patterns in the data that
would have alerted various organizations to a problem earlier. Ford and Firestone
said they had not detected such a pattern in the data, and the NHTSA said they
had looked at a variety of databases without finding the tire flaw pattern.
According to the Times, without having a clear idea of what one is
looking for makes it much harder to find the problem. The Times did have
the advantage of hindsight when it analyzed the data.
The
Department of Transportation databases independently track defects that
contribute to fatal accidents, with data on about 40,000 fatalities each year.
However, they no longer contain anecdotal evidence from garages and body shops
because they no longer have the funding to gather this information. They only
have information on the type of vehicle, not the type of tire, involved in a
fatality. Tire involvement in fatal accidents is common because tires, in the
normal course of their life, will contribute to accidents as they age, so that
accidents where tires may be a factor are usually not noteworthy. In
comparison, Sue Bailey, the administrator of highway safety, pointed out that
accidents with seat belt failures stand out because seat belts should never
fail. Safety experts note that very little data is collected on accidents
resulting only in nonfatal injuries even though there are six-to-eight times more
such accidents than fatal accidents. Experts also note that no data is
collected on the even more common accidents with only property damage. If more
data were collected, the Times concluded, "trends could be obvious
sooner." Until Firestone announced its tire recall in August 2000, NHTSA
had received only five complaints per year concerning Firestone's ATX, ATX II,
and Wilderness AT tires out of 50,000 complaints of all kinds about vehicles.
Although
Firestone executives had just testified that Firestone's warranty claim data
did not show a problem with the tires, Firestone documents made public by
congressional investigators showed that in February Firestone officials were
already concerned with rising warranty costs for the now-recalled tires.
September
19---USA Today
reported that in more than 80 tire lawsuits against Firestone since 1991,
internal Firestone documents and sworn testimony had been kept secret as part
of the Firestone settlements. Observers noted that had these documents been
made public at the time, many of the recent deaths might have been avoided.
September 22---The Firestone tires that were at the center of the
recalled tires passed all U. S. government--required tests, causing NHTSA head
Sue Bailey to say, "Our testing is clearly outdated."
During September, both Bridgestone and
Firestone announced they would install supply chain information systems to
prevent anything similar happening in the future. Firestone started spending
heavily to make its claims database more usable for safety analysis.
January
2001 Yoichiro
Kaizaki, the president and chief executive of the Bridgestone Corporation,
resigned.
May 22, 2001---Bridgestone/Firestone ended its 100-year relationship as
a supplier to Ford, accusing the automaker of refusing to acknowledge safety
problems with the Explorer. June 23, 2001---Sean Kane, a leading a
traffic safety consultant and a group of personal injury lawyers disclosed that
in 1996 they had identified a pattern of failures of Firestone ATX tires on
Ford Explorers but did not report the pattern to government safety regulators
for four years. They did not inform the NHTSA, fearing a government
investigation would prevent them from winning suits against Bridgestone/Firestone
brought by their clients. Professor Geoffrey C. Hazard, Jr., a leading expert
on legal ethics, said the lawyers had "a civic responsibility" to
make their findings known but had not broken any laws by withholding this
information. June 27, 2001---Bridgestone/Firestone announced it planned
to close its Decatur, Illinois, factory where many of the tires with quality
problems had been produced. October 4, 2001-Firestone announced it would
replace an additional 3.5 million Wilderness AT tires made before 1998.
May 2,
2002 - A federal
appeals court in Chicago denied the right of plaintiffs nationwide the join in
a single lawsuit against both Bridgestone/Firestone and Ford over faulty tires.
The court explained that such a suit would be too complex to be manageable.
This ruling did not affect the hundreds of wrongful death and personal injury
that were already being prosecuted. Settlements began when on December 21,
2002, Ford announced to pay state governments $51.5 million, accepting the
charge that they had misled consumers about the safety of its SUVs and had
failed to disclose the known tire risks. However, Ford did deny any wrongdoing.
The settlement did not affect private claims. Ford also pointed out that it had
already spent about $2 billion to replace millions of Firestone tires suspected
of being faulty.
Both
companies ran into sales problems after the SUV tire debacle. The companies
spent about $2 billion each just to replace tires, and lawsuits have been
expensive for both, although the size of the settlements has not been revealed.
As if all of that was not enough, they had to face the same problems that hit
most other companies during the economic decline after the September 11, 2001
terrorist attacks. Firestone had problems beyond its tire manufacturing. It is
also a major retail service company, and many of its service customers did not
distinguish between the two sides of the company, resulting in a decline in
that business also. The service unit turned to NuEdge CRM software to identify
existing customers who had not returned for eight months or more and offered
them special incentives depending upon their past frequency of visits, the
amount spent and their distance from a service unit.
Ford also
ran into trouble, particularly a decline in sales. Its U.S. market share fell
from 25.4% in 1996 to only 21.8% in 2001 and sales of less than 21% expected
for 2002. Ford's Explorer sales plummeted, losing about 60% of its pre-scandal
market share. The company had to close five plants, lay off 35,000 workers (10%
of its workforce), and eliminate four car lines, including the previously
successful Mercury Cougar and the Lincoln Continental. In late 2001, Ford
pushed out Chairman and CEO Jacques Nasser, replacing him with Bill Ford, the
great grandson of Henry Ford.
Sources:
Reuters New
Service, "Ford, Firestone Settle Alabama Rollover Lawsuit,"
Forbes.com, January 8, 2003; :Ford Settles Claims Over S.U.V. Tire Safety, New
York Times, December 21 2002; Christopher Lin, "Break Down No
More," CIO Magazine, April 1, 2002; "Single Suit Rejected on
Firestone," The New York Times, May 3, 2002; Jeff Sweat, "Keep
'Em Happy," Informationweek.com, January 28, 2002; Alex Taylor,
"The Fiasco at Ford," Fortune, January 22, 2002; Kenneth N.
Gilpin, "Firestone Will Recall an Additional 3.5 Million Tires," The
New York Times, October 5, 2001; Keith Bradsher, "S.U.V. Tire Defects Were
Known in '96 but Not Reported," New York Times, June 24, 2001;
David Barboza, "Bridgestone/Firestone to Close Tire Plant at Center of
Huge Recall," New York Times, June 28, 2001; Mike Geyelin,
"Firestone Quits as Tire Supplier to Ford," Wall Street Journal,
May 22, 2001; Miki Tanikawa, " Chief of Bridgestone Says He Will
Resign," New York Times, January 12, 2001; Kenneth N. Gilpin,
"Firestone Will Recall an Additional 3.5 Million Tires," New York
Times, October 5, 2001; Matthew L. Wald and Josh Barbanel, "Link
Between Tires and Crashes Went Undetected in Federal Data," New York
Times, September 8, 2000; Robert L. Stimson, Karen Lundegaard, Norhiko
Shirouzu, and Jenny Heller, "How the Tire Problem Turned into a Crisis for
Firestone and Ford," Wall Street Journal, August 10, 2000; Mark
Hall, "Information Gap," Computerworld, September 18, 2000;
Keith Bradsher, "Documents Portray Tire Debacle as a Story of Lost
Opportunities," New York Times, September 10, 2000; Ed Foldessy and
Stephen Power, "How Ford, Firestone Let the Warnings Slide By as Debacle
Developed," Wall Street Journal, September 6, 2000; Ford Motor
Company, "Bridgestone/Firestone Announces Voluntary Tire Recall,"
August 9, 2000; Edwina Gibbs, "Bridgestone Sees $350 Million Special Loss,
Stock Dives," Yahoo.com, August 10, 2000; John O'Dell and Edmund Sanders,
"Firestone Begins Replacement of 6.4 Million Tires," Los Angeles
Times, August 10, 2000; James V. Grimaldi, "Testimony Indicates Abuses
at Firestone," Washington Post, August 13, 2000; Dina ElBoghdady,
"Broader Tire Recall Is Urged," Detroit News, August 14, 2000;
"Ford Report Recommended Lower Tire Pressure," The Associated
Press, August 20, 2000; Caroline E. Mayer, James V. Grimaldi, Stephen
Power, and Robert L. Simison, "Memo Shows Bridgestone and Ford Considered
Recall over a Year Ago," Wall Street Journal, September 6, 2000;
Timothy Aeppel, Clare Ansbery, Milo Geyelin, and Robert L. Simison, "Ford
and Firestone's Separate Goals, Gaps in Communication Gave Rise to Tire
Fiasco," Wall Street Journal, September 6, 2000; Matthew L. Wald,
"Rancor Grows Between Ford and Firestone," New York Times,
September 13, 2000; Keith Bradsher, "Questions Raised About Ford
Explorer's Margin of Safety," New York Times, September 16, 2000;
"Sealed Court Records Kept Tire Problems Hidden," USA Today,
September 19, 2000; and Tim Dobbyn, "Firestone Recall Exposes Flaws in
Government Tests," New York Daily News, September 22, 2000;
Bridgestone/Firestone, Inc., "Statement of February 4, 2000,"
Tire-defects.com.