Firetone Collapse

In May 2000, the National Highway Traffic Safety Administration (NHTSA) in the United States issued a letter to the Ford Motor Co. and Firestone Inc. asking for information about the high incidence of tire failures on the Ford Explorer Sport Utility Vehicles (SUVs). During July, Ford analyzed the data on tire failures. The analysis revealed that Firestone Radial 15 inch ATX and ATX II tires produced in North America and Wilderness AT tires produced at Decatur, Illinois Plant had very high failure rates with the treads peeling off. When the tires failed, the vehicle often rolled over and killed the occupants.

Firestone amid concerns over tread separation, accidents, injury and death announced a voluntary recall of all Radial ATX and ATX II
and Wilderness AT tires. Around 6.5 million tires were recalled. These tires were original equipment on certain Ford Explorer SUVs, Mercury Mountaineer, Ford Ranger pick up trucks and Mazda Navajo and B-series pick up trucks.
The Firestone tire recall was perhaps the biggest auto safety crisis in the US history.
NHTSA put the death figure in February 2001 at 174 which has risen from 101 deaths reported in September 2000. However, analysts felt that there were as many as 250 deaths and more than 3000 injuries associated with the defective tires. Most of the deaths occurred in accidents involving the Ford Explorer and the victims and their families filed hundreds of lawsuits. In May 2001, Firestone announced that it was severing its ties with Ford and alleged that the problems in the Ford Explorer caused 174 deaths. Firestone alleged that Ford was trying to divert attention from the problems with Explorer.
Ford and Firestone seemed to have known about the flaws in the tires for almost a year prior to the recall but it wasn't until NHTSA launched a preliminary investigation that Firestone announced a voluntary recall. Questions were raised about how Ford and Firestone responded to the first evidence of tire problems. Ford officials said that the issue first surfaced in Saudi Arabia, where drivers were prone to deflate their tires for better traction while driving in the desert sand. When they returned to hard pavement, they failed to reinflate the tires and the combination of low pressure and extreme climate led to tire disintegration. Ford replaced the tires on some 45,000 vehicles in the Middle East and in several other countries with extreme
temperatures.

NHTSA officials felt that Explorers were too heavy for the 15-inch tires.
However, there was no definitive evidence to indicate that Ford's design specification for Explorer's tires was to blame. A lawyer representing some of the victims said, "There are a lot of smoke and mirrors going on, Ford can say it's Firestone's fault, and Firestone can say it's Ford's fault."5
John Lampe, Executive vice president, Firestone, said that Firestone would replace any tires found to be unsafe. Susan Sizemore, public relations manager at Bridgestone's US headquarters in Nashville said, "This is not a recall. It's a customer satisfaction initiative. If necessary, we are replacing those tires with either our tires or a competitor's."
Firestone alleged that Ford Explorer without Firestone tires were still experiencing rollover problems. Officials conceded that some of the Firestone tires involved in the recall were apparently world class tires and did not appear to have safety problems but said the tires needed to be included in the recall because of loss of customer confidence in the Firestone tires.

The committee investigating the case after hearing from both sides said that there was a need for further analysis by an independent source such as NHTSA about both the Explorer and the
tires.
In 2001, Firestone announced that it would shut down one of its US plants, which could be its Decatur, Illinois, plant by no later than December 31, 2001. This would eliminate some 1, 500 jobs.
Bridgestone recorded a net loss of $ 250.3 million for the first half of 2001 because of the tire recall. In the first half of 2000, Bridgestone recorded a net profit of 18.90 billion yen. An extraordinary loss of $ 570 million taken by Firestone in June 2001 to pay lawsuits and clear up other costs related to the tire recall was the main reason behind the loss.

Company sourced said that they would try to revive their North American operations by shifting focus to the Bridgestone brand. Shigeo Watanabe, president of Bridgestone said, "I don't think the Firestone brand will disappear, but the Bridgestone brand will grow."
The recall of 6.5 million Firestone tires on the Ford Explorer in August 2000 cost Ford about $ 500 million. Explorer sales had plunged 21% in 2001. The company's earnings were expected to sink by 65% in 2001. Ford's share of the US automobile market had fallen by 1.7 percentage points in 2001 to 23.1%.
Officials at Ford felt that the future of Ford (Explorer) would depend on how customers responded to Ford's reaction to the crisis. One official said, "My message to consumers is, if you don't think we have behaved in the way the world's leading consumer company should behave, then tell us, because we want to earn that loyalty and respect."7 Commenting on Ford's future relationship with Firestone, that official said, "Given the importance of the relationship between tires and vehicle safety, and the importance of brand perception, how can you put Firestone tires on the new Explorer that comes out next year?"8