THE FORD-FIRESTONE CASE I.
Background of the Case In 2000, Bridgestone-Firestone recalled 6.5 million Firestone Wilderness, AT, ATX and ATX II P235/75R15 tires (15” tires). Firestone tires included in the recall were installed as original equipment on Ford Explorer (model years 1991-2000), among other vehicles. This recall was a major blow to Firestone, which was one of the most admired corporations in the United States (US). It has been caused by thousands of complaints involving hundreds of deaths and injuries as a result of vehicle rollover after Firestone tires failed through sudden tread separation from 1992 to 2000.
II. Statement of the Problem What is the best remedy by Firestone, Ford and/or US regulators in order to end the problem on fatal accidents being caused by tread separation on tires?
III. Objectives of the Case This case aims to:
Identify the significant operational and policy lapses of Ford, Firestone and US regulators that led to the fatal accidents caused by tread separation from the Firestone tires.
Establish a sound recommendation on the best solution/remedy to end the problem on fatal accidents caused by tread separation on tires of Ford, Firestone and/or US regulators based on the analysis of their respective lapses.
IV. Areas of Consideration Presented below are the lapses of key stakeholders that led to the fatal vehicular accidents across US and overseas: A. Lapses of Firestone (including the tire industry)
Firestone was aware of overseas complaints on their tires, but it hesitated at sending Ford Explorer owners a letter offering the option of upgrading their original tires from
Ford‟s World-wide export division for fear that US authorities would have to be notified and that the Saudi government would react dramatically.
Cost pressures could have resulted in low quality of tires being produced by Firestone. Makers of autos and tires around the world were overly concerned about price and market share but not safety.
Tire makers rely on their own knowledge of what type of tire works on what types of cars.
Some suspect that a strike in the Decatur plant of Firestone, poor process control and non-standard operating procedures could have led to tread separation.
During manufacturing, tire rubber was allowed to sit too long that solvents were used haphazardly to try to improve the rubber‟s adhesive properties and that efforts to speed up the vulcanization process may have led to flawed tires.
After Firestone encountered worker strike, the company started a schedule of 7 days a week and 12 hour shifts. Production workers voiced complaints and maintained that with the new work schedule it was very hard to do good quality work.
Workers at Decatur say they commonly „gassed‟ or sprayed a chemical solvent on the rubber to make it thicker. Several workers say they were told to stop using the solvent in the „last year‟.
In 1997, Bridgestone/Firestone began receiving numerous complaints of injuries and property damage involving certain Firestone tires that were not recalled until August 2000.
Top executives of Bridgestone/Firestone came under criticism for not responding more quickly and forcefully to consumer fears in the US.
B. Lapses of Ford (including the auto industry)
After replacing tires in Saudi Arabia, Malaysia and Venezuela, Ford held off taking action in the US because its review of various databases assured the company that there was not a problem in the US, which turned out to the wrong.
Makers of autos and tires around the world were overly concerned about price and market share but not safety.
Car makers typically don‟t provide a test car for the tire makers to use in their design process.
Ford exclusively equipped all 1998 model Explorers with Firestone tires despite of frequencies of related fatal accidents. Ford did not consider other supplier, such as Goodyear since Goodyear could not match Firestone‟s price.
The tire maker and the carmaker gave slightly different advice to owners of Explorers that have the tires.
Most SUVs are tall and heavy for their size. Their portly weight and a high center of gravity are not conducive to handling around obstacles or other accident avoidance maneuvers.
Ford threw the entire blame on Firestone, stating that the fatal accidents were caused by tire problem and not vehicle problem.
Some members of Congress believe that Ford was not straightforward with Congress about test data.
C. Lapses of US Regulators
The National Highway Traffic Safety Administration (NHTSA) did not immediately act on the reports of Sam Boyden (from State Farm Insurance) in 1998 but waited until 2000 when Houston‟s KHOU TV station aired a segment on tread separation that prompted several dozen people in Texas to report similar trouble to regulators.
The government did not collect necessary data on how many tire failures were there, and the tire makers were also unwilling to share their data on their own brands.
Federal regulators in Washington were unaware of overseas recalls, even though some US and British government-operated Ford Explorers were among those getting free new tires in the Gulf.
Fatalities are investigated very thoroughly, but property damage crashes are hardly investigated at all.
V. Alternative Courses of Action In order to avoid future fatal mishaps in the future, below are the proposed alternative courses of action: 1. Suspend operations at Decatur II, factory, which produced a high percentage of the tires involved in the tread-separation accidents if improvements have to be made to equipment or facilities there
Suspending operations to install improvements on equipment or facilities in Decatur II will reduce/minimize the tread-separation accidents. Initially, Bridgestone/Firestone will incur great amount of costs to do this which will further hurt the ailing financial condition of the company. But by doing so, in the long run, it may eventually reduce the costs related to product recalls and save the company from total loss of customers and closure of the entire business. However, suspending operations will also mean temporary lay-offs of workers while the improvements are still on-going.
2. Ford to begin offering consumers the option of choosing tires on all its vehicles, allowing customers to gradually able to choose an alternative to Firestone tires on many new vehicles
Allowing customers themselves to choose alternatives to Firestone tires seems that Ford would just like to shift the burden, responsibility and risk of the company to the customers/car owners. This is not a good practice of corporate social responsibility since the company just wants to free itself from liabilities arising from possible accidents by disclaiming later on that customers are the ones who choose the wrong tires. Since Ford is the seller and expert on mechanics, it should be Ford‟s responsibility to choose the safest supplier of tires taking into consideration the importance of customers/car owners/passengers‟ safety over costs. This alternative does not also guaranty that future fatal accidents will be minimized or avoided.
3. Improvements in regulations by the US government by passing legislation that requires auto companies to replace motor vehicle parts in a foreign country for safety reasons to notify American regulators and would require tire manufacturers to give regulators data on warranty claims, by updating the standards used for SUV certification and by publishing rollover ratings
With this alternative, US regulator increases its proactiveness by increasing/expanding the scope and timeliness of information being gathered from automakers encompassing complaints around the globe not just in the US. With timely and expanded scope of information, US regulator can indirectly use its authority to compel automakers to perform prompt corrective actions before any major disasters happen. However, without full and honest participation/compliance of automakers (such as deliberate concealment of information), the government still cannot do much to avoid fatal accidents in the future.
4. Combination of all three alternatives above being simultaneously implemented by all parties involved but with more firm actions
Since all stakeholders (Ford, Firestone and US regulators) have their respective lapses that led to the fatal car accidents in the 90s, an alternative to remedy the problem is for all of them to simultaneously improve their respective processes and internal controls. For the manufacturers, Ford and Firestone, exhaust all production and safety techniques, including the use of fishbone diagram and Pareto Analysis in identifying causes of production defects and assessing the overall quality and safety of cars and tires being manufactured. Quality control
processes
and
stress
testing
programs
must
be
thoroughly
reviewed,
revised/improved and invested upon. Moreover, full cooperation and faithful compliance of Ford, Firestone and other companies is necessary for the regulations be effectively implemented. Firestone should help its workers, who will be temporary laid-off as a result manufacturing improvement, by seeking part time jobs. On the other hand, Ford should be the one to choose the right suppliers of its tires, putting on top of priority the safety of
customers over costs that will be incurred; otherwise, if it insists on allowing customers to choose their own preferred tires, Ford must disseminate added information to customers on the strengths and weaknesses of each tire brand/supplier, and Ford must not be totally freed from liabilities that may arise from wrong choice of tires of customers since it is Ford, being the car manufacturer, which is expected to be the expert on mechanics. Rather than working independently according to their own financial/operational interests, car manufacturers and car parts suppliers must work hand-in-hand in determining the specifications of car components that best fit the car models being manufactured.
VI. Recommendation The best solution in order to avoid similar fatal mishaps in the future is for all the parties involved to simultaneously implement process and control improvements taking into consideration their own respective lapses that contributed to loss of several lives, injuries and damaged properties within a decade. Safety of customers must be supreme of all and must never be compromised despite of different interests of companies and regulator. Pro-activeness must be developed by all parties involved which is exercised through timely and accurate information being reported to authorities, timely investigation and implementation of stricter regulations by the authorities, and major investments in manufacturing and safety processes and control improvement by manufacturers. Moreover, cooperation among parties involved is very important since each party functions like a piece of puzzle in the whole picture of auto-industry.
Reference Pinedo, M.; Seshadri, S.; Zemel, E. (2000). “The Ford-Firestone Case”, Department of Information, Operations and Management Sciences, Leonard N. Stern School of Business, New York University, New York, NY 1002
Group 3 Members (BUS560M-GTA): 1. Aubrey Famatigan 2. Carmi Magno 3. Ronnell Dy
