Question: On August 9, 2000, 6.5 million

On August 9, 2000, 6.5 million Firestone tires were recalled in the United States.1 One thousand five hundred and ninety- nine ATX, ATXII, and Wilderness AT tires installed on Ford Explorers were to be replaced at company cost due to evident defects, public outcry, government investigation, and earlier recalls in Venezuela, Malaysia, Thailand, Colombia, Ecuador, and Saudi Arabia. Early estimates of costs of the recall were in the range of $300 to $600 million,2 but these did not include loss of future revenues due to loss of consumer confidence or costs of future litigation. Further recalls followed.3 As of September 2001, an estimated 192 deaths and over 500 injuries had been attributed to these tires.4 As the prospect of having to recall faulty tires increased, Firestone and Ford had a falling out. Firestone, or Bridgestone/Fire- stone as it became known, alleged that the Ford Explorer suspension accounted for at least part of the problem. Ford charged that Firestone had failed to advise them of potential problems and provide their data for analysis. Ultimately, both companies were “invited” to face questioning and testify before U.S. Congress and Senate Subcommittees. Déjà vu, All Over Again Firestone and Ford had been in recall debacles before. Firestone had to recall tires in 1977, 1978, and 1980. The 1978 recall was so large (14.5 million units) that it threatened the financial viability of the company. In fact, Bridgestone, a Japanese company and the number 3 tire maker in the world, had to rescue Firestone, then the number 2 tire maker, from financial collapse in May 1988. Consequently, although most design and operating decisions preceded the takeover, much of the decision making with regard to the recall in 2000 was under the Bridge- stone/Firestone regime. Many Firestone people, however, continued to be involved. Ford had suffered significantly during the Pinto fires fiasco.5 Introduced in 1970, the small Pinto would burst into flames when struck from the rear at a speed of twenty-one miles per hour. This was due to a design flaw that permitted the rupturing of the Pinto’s gas tank. Many lawsuits persisted until the late 1970s. Multiple failures of Ford and Fires- tone people—and of government regulators at the National Highway Traffic Safety Administration (NHTSA) to recognize such problems early and to deal with them effectively—raise interesting questions, including these: Why did the companies get involved in yet another recall debacle? Did the companies and the NHTSA know about the need to investigate and recall the Wilderness tires much earlier than their official investigations began? If not, why not? Did the companies deal with the recall ethically? What lessons can be learned about crisis management? The key events of the recall are summarized in the accompanying table. The Safety Problems: Firestone Tire Tread Separation and Ford Explorer Design The tread separation problem and the related NHTSA findings were summarized in the Executive Summary of NHTSA’s Engineering Analysis Report and Initial Decision6 as follows: Belt-leaving-belt tread separations, whether or not accompanied by a loss of air from the tire, reduce the ability of a driver to control the vehicle, particularly when the failure occurs on a rear tire and at high speeds. Such a loss of control can lead to a crash. The likelihood of a crash, and of injuries or fatalities from such a crash, is far greater when the tread separation occurs on a SUV than when it occurs on a pickup truck. Tread separation claims included in the Firestone claims database involving the recalled and focus tires have been associated with numerous crashes that have led to 74 deaths and over 350 injuries (as of March 2001). Tread separation complaints from all sources included in the ODI consumer complaint database (including the Firestone claims data) that can be identified as involving these tires have reportedly led to 192 deaths and over 500 injuries (as of September 2001). Ford/Firestone Tire Recall Time Line November 1978: Firestone recalled 14.5 million of the Firestone 500 series tires after reports of accidents and deaths due to tread separation on steel-belted radial tires. May 1988: Bridgestone, the world’s number 3 tire maker, acquired Firestone, the number 2 tire maker. The takeover rescued Firestone from potential financial collapse due to the 1978 recall. February 1989: Arvin/Calspan Tire Research Facility of Alexandria, Virginia, an independent research lab hired by Ford, measured the performance of seventeen Firestone tires. The lab reported three belt-edge separation failures of the seventeen tires tested. March 1990: The Explorer was introduced as a 1991 model. The Explorer was redesigned to its current chassis design in 1995. 1991: Bridgestone/Firestone ATX, ATX II, and Wilderness AT tires became original equipment for the Ford Explorer (1991–2000), Ford Ranger (1991–2000), F-150 truck (1991–1994), Mercury Mountaineer (1996–2000), Mazda Navajo (1991–1994) and B Series pickup truck (1994–2000). Eventually, over 14.4 million tires would be manufactured. 1992: Bridgestone/Firestone began investigating allegations of safety problems with its tires. Ford began receiving complaints regarding Firestone tires on its light-truck models. 1994–1996: The workers at Firestone’s Decatur, Illinois, plant went out on strike. Firestone used replacement workers during this period to continue production. July 1998: State Farm Insurance research analyst Sam Boyden sent an email to the NHTSA reporting twenty-one tread separation cases involving the Firestone ATX tire. Boyden continued to send emails to the NHTSA about subsequent Firestone tread separation accidents. October 1998: Ford noted tread separation problems on Ford Explorers in Venezuela and sent samples to Bridgestone/Firestone for analysis. A Ford-affiliated dealer in Saudi Arabia wrote to Ford Motor Company complaining of problems with Firestone tires. March 12, 1999: A Ford memorandum noted that Ford and Bridgestone/Firestone executives discussed notifying U.S. safety authorities about a planned tire recall in Saudi Arabia. Ford decided to replace the tires overseas without telling federal regulators. April 1999: The NHTSA’s Uniform Tire Grading Report gave Firestone ATX II and Wilderness AT tires the lowest grade on stress test temperature. The overwhelming majority of comparable tires received higher grades. It is believed that overheated tires lead to tread separation. August 1999: Ford began replacing Firestone tires on Explorers sold in Saudi Arabia after reports of tread separation problems. Ford did not report the safety concerns but called the replacement program a “customer notification enhancement action.” January 19, 2000: Internal documents showed that Firestone executives knew about rising warranty costs due to accidents caused by the ATX, ATX II, and the Wilderness AT tires. February 2000: Houston, Texas, TV station KHOU does a story on tread separation of Firestone tires used on Ford Explorers. The TV station gives the NHTSA’s 800 telephone number for consumers to report complaints. Consumers start calling in with reports of tread separations of Firestone tires. March 6, 2000: Based on the information the NHTSA received, primarily from complaints stemming from the Houston, Texas, TV story, the agency begins its initial evaluation of Firestone Tires. May 2000: Ford changed Explorer’s standard equipment to Goodyear tires in Venezuela while waiting for Firestone to come to a resolution regarding the tire separation problems. Ford recalled Firestone tires in Malaysia, Thailand, Colombia, and Ecuador. The entire overseas recall reached 46,912 sport-utility vehicles. May 2/8, 2000: The NHTSA launched a formal investigation (PE-0020) into the tread separation cases involving the Firestone ATX and Wilderness tires. May 10, 2000: The NHTSA sends letters to Ford and Firestone requesting information in connection with PE-0020. June 8, 2000: Ford requests that Firestone provide all information that they gave to the NHTSA relating to PE-0020. This information includes the claims data that will demonstrate the high accident rate of the tires. July 28, 2000: Ford receives Firestone’s information, and begins an analysis. August 4, 2000: Ford found a pattern in the data pointing to the fifteen-inch ATX, ATX II, and Wilderness AT tires made at the Decatur, Illinois, plant and called in the Firestone experts. They found that older tires produced late in each production year from 1994 to 1996 had a higher failure rate. August 9, 2000: Bridgestone/Firestone announced a region-by-region recall of more than 6.5 million AT, ATX II, and Wilderness AT tires. Approximately 2 million Ford Explorers were named as subjects to the recall. The cost estimate for the recall ranged from $300 million to $600 million. The hot- weather regions were scheduled for tire replacement first, with other regions to follow. The NHTSA reports that Firestone tire separations were responsible for forty-six deaths. August 10, 2000: Plaintiff attorneys involved with Firestone litigation over the past decade note they know of 107 related tire cases, with ninety of those having a direct link to the recalled tires. August 10, 2000: Ford claimed it became aware of the tire separation problem one year ago from anecdotal reports from Saudi Arabia. August 16, 2000: The NHTSA increased the number of deaths connected to the Firestone tread separations to sixty-two. September 1, 2000: The NHTSA announced another twenty-four Firestone tire models showed rates of tread separation exceeding those of the recalled tires. The NHTSA also increased the estimate of deaths attributed to Firestone tires from sixty-two to eighty-eight. Venezuelan authorities report that at least forty-seven people died because of the Firestone tires. The belt-leaving-belt tread separa- tions in the recalled and focus tires generally occur only after several years of operation. Thus, since the focus tires have not been on the road as long as the recalled ATX tires, the absolute number of failures of those tires, and the unadjusted failure rate of those tires, are less than those of com- parable ATX tires. Claims in the Fire- stone claims database involving the focus tires have been associated with 17 deaths and 41 injuries, with additional crashes and casualties reported in the ODI complaint database, including reports of six additional fatalities. However, on a plant-by- plant basis, the focus tires manufactured at the Wilson and Joliette plants have exhibited tread separation failure trends that are similar to those experienced by the recalled ATX tires at similar service intervals. These failure trends indicate that it is likely that, if they are not removed from service, the focus tires—at least those manufactured before May 1998—will experience a similar increase in tread separation failures over the next few years, leading to a substantial number of future crashes, injuries, and deaths. The tread separation failure experience of the focus tires is far worse than that of their peers, especially that of the Goodyear Wrangler RT/S tires used as original equipment on many Ford Explorers. The belt-leaving-belt tread separations that have occurred and are continuing to occur in the recalled and focus tires begin as belt-edge separation at the edge of the second, or top, belt. This is the area of highest strain in a steel belted radial tire and is a region with relatively poor cord-to-rubber adhesion because bare steel is exposed at the cut ends of the cords. Once belt-edge separations have initiated, they can grow circumferentially and laterally along the edge of the second belt and develop into cracks between the belts. If they grow large enough, they can result in catastrophic tread detachment, particularly at high speeds, when the centrifugal forces acting on the tire are greatest. ODI conducted a non-destructive analysis of numerous randomly collected focus tires and peer tires from southern states, where most of the failures have occurred, using shearography, which can detect separations inside a tire. This shearography analysis demonstrated that the patterns and levels of cracks and separations between the belts were far more severe in the focus tires than in peer tires. Many of the focus tires that were examined were in the later stages of failure progression prior to complete separation of the upper belt. The shearography results for tires manufactured at Wilson were similar to those manufactured at Joliette. A critical design feature used by tire manufacturers to suppress the initiation and growth of belt-edge cracks is the “belt wedge,” a strip of rubber located between the two belts near the belt edges on each side of the tire. The belt wedge thickness, or gauge, in the ATX tires and the Wilderness AT tires produced prior to May 1998 is generally narrower than the wedge gauge in peer tires, and the wedge gauge in cured tires was often less than Firestone’s target for this dimension. The tires with this wedge did not adequately resist the initiation and propagation of belt-edge cracks between the steel belts. During March and April 1998, Firestone changed the material composition and increased the gauge of the wedge in its Wilderness AT tires (and some other tire models). Another important feature of radial tires related to the prevention of belt-leaving-belt separations is the gauge of the rubber between the two steel belts, or “inter-belt gauge.” The inter-belt gauge initially specified by Firestone for the focus tires is generally narrower than the inter-belt gauges in peer tires and is narrower than Firestone’s original specification for the ATX tires in the early 1990s. Moreover, the actual measured gauge under the tread grooves in several of the focus tires measured by ODI was far less than Firestone’s minimum design specification. Since an inadequate inter-belt gauge reduces the tire’s resistance to crack growth and its belt adhesion capabilities, this narrow inter-belt gauge may be partially responsible for the relatively low peel adhesion properties of the focus tires compared to peer tires. In August 1999, after becoming concerned about the adequacy of the inter-belt gauge in the cured Wilderness AT tires, especially in the regions directly under the tread grooves, Firestone changed the inter-belt gauge specification back to the original dimension. Another relevant feature is the design of the shoulder pocket of the focus tires, which can cause higher stresses at the belt edge and lead to a narrowing, or “pinching,” of the wedge gauge at the pocket. The focus tires exhibit a series of weak spots around the tire’s circumference, leading to the initiation and growth of cracks earlier than in competitor tires and in other Firestone tires produced for light trucks and SUVs. In addition, many of the focus tires exhibited shoulder pocket cracking similar to that which Firestone identified as a significant contributor to the risk of tread detachment in the recalled ATX tires. Because the tread separations at issue in this investigation occur only after several years of exposure, almost all of the failures on which ODI’s analysis of field experience was based involved tires manufactured before May 1998, when Firestone increased the dimensions and improved the material of the belt wedge. In theory, these modifications to the wedge would tend to inhibit the initiation and propagation of the belt-edge cracks that lead to tread separations. If these modifications actually improved the resistance of the focus tires to belt-edge separations, the historical failure trends described above may not predict the future performance of the newer tires. However, because tread separation failures rarely occur in the focus tires until at least three years of use, it is not now possible to ascertain from field experience whether their actual performance has improved significantly. The rate of tread separation failures on Ranger pickups is lower than the rate of such failures on Explorers for a variety of reasons, including the fact that the Explorer generally carries higher loads and is a more demanding application, and the tires on the Explorer had a significantly lower recommended inflation pressure (especially on the rear wheels). The risk of such a separation on Rangers remains a cause for possible concern. Nevertheless, because the likelihood of a crash due to a tread separation, and of deaths and injuries resulting from such a crash, is substantially lower when the separation occurs on a pickup than on a SUV, NHTSA’s initial defect decision does not apply to focus tires installed on pickup trucks. Under the National Traffic and Motor Vehicle Safety Act, in order to compel a manufacturer to con- duct a recall, NHTSA has the bur- den of proving that a safety-related defect exists in the manufacturer’s products. The record of this investi- gation supports a determination that a safety-related defect exists in the focus tires manufactured by Fires- tone prior to its 1998 modifications to the belt wedge that are installed on SUVs. Although the agency has concerns about the possibility of future tread separations in focus tires manufactured after the wedge change, the available evidence at this time does not clearly demonstrate that a safety- related defect exists in those focus tires. NHTSA will, however, continue to closely monitor the performance of these tires. Therefore, on the basis of the information developed during the ODI investigation, NHTSA has made an initial decision that a safety-related defect exists in Firestone Wilderness AT P235/75R15 and P255/70R16 tires manufactured to the Ford specifications prior to May 1998 that are installed on SUVs. These tires were manufactured primarily at Wilson and Joliette and, to a lesser extent, at Oklahoma City. The initial decision does not apply to the P255/70R16 tires produced at Decatur or any of the Wilderness AT tires produced at Aiken, since these tires were all manufactured after May 1998. At the request of Bridgestone/Firestone’s chairman, the NHTSA also investigated the claims that the Ford Explorer had a design defect, probably in its suspension, that contributed to the tread separation in Wilderness tires. In his Statement to the U.S. congressional committees, the NHTSA’s deputy secretary, Michael P. Jackson, commented that “NHTSA has had no credible evidence that the Ford Explorer’s design is in any way responsible for causing tread separation or other such catastrophic tire failure.”7 When Did the Companies Know of Problems, and What Did They Do About Them? According to the time line information, both Ford and Firestone received information about tire tread separations as early as 1992. These investigations may have been limited in some way, perhaps focused on or influenced by legal liability considerations. In any event, they do not appear to have raised “red flags” for Ford or Firestone such that either company was actively following up looking for further evidence. Actually, Ford had received an earlier warning in February 1989, when an independent testing lab it hired found that three of seventeen tires tested had tread separations. Again, this information does not appear to have been carried forward as part of an ongoing formal risk assessment program. Interestingly, in 1992, Ford chose the P235 tires, which were later recalled, over the smaller P225 tires, which had tested better in turning (a prelude to rollover) tests. A memo shows that Ford management was aware of the potential risk. Moreover, in order to improve the stability of the Explorer, Ford lowered the recommended tire pressure to 26 p.s.i. from the normal 30–35 p.s.i. that Firestone usually recommended. Firestone later insisted that this low pressure recommendation increased tire heat and caused the tire separations. At the time, however, Fires- tone went along; when Ford found that the mushier tires worsened fuel economy and asked for a fix, Firestone reduced the tire weight by about 3%.8 Unlike General Motors, which has their own in-house tire safety and research unit,9 neither Ford nor Firestone had an ongoing tire safety, testing, and database analysis program. Perhaps, if they had, they would have been aware of and following the work of Sam Boyden, the State Farm insurance analyst who began to email the NHTSA and have person-to-person conversations with the NHTSA about Firestone tire prob- lems in July 1998. Unfortunately, these emails and conversations do not appear to have been followed up until May 2, 2000, when the official investigation started. Even the NHTSA has admitted that they did not have an ongoing database project. Ford had to wait for Firestone to send them data, and Firestone initially had only cursory warranty data and needed to build a more comprehensive and useful data set. The NHTSA had to assemble data from various sources, including the companies, as well. Neither of the companies nor the NHTSA were putting together a complete picture on an ongoing basis—they were all reacting, focused on short-term concerns, and using makeshift resources. Ford and Firestone became aware of tire failures in warm climates in October 1998. The companies discussed the problems and Ford proposed a recall in Saudi Ara- bia. According to an internal Ford memo dated March 12, 1999, Firestone had asked Ford to handle it on a case-by-case basis so that the U.S. Department of Transportation would not have to be notified and so that the Saudi government would not overreact.10 Ford had apparently told Firestone that the recall should be reported since the tires were also sold in the United States but ultimately did not do so. Later, Ford maintained that it was not obligated to report the foreign recalls to U.S. regulators.11 Ford asked Firestone to do some tests in November 1999. These tests, which became known as the “Southwest Study,” were completed in April 2000, but no evidence of a problem was discovered.12 Ultimately, when facing inflamed public reactions in specific locales to mounting accidents and deaths, Ford recalled Fires- tone tires in Saudi Arabia, Venezuela, and four other countries between June 1999 and May 2000. Firestone continued to advise Ford that there were no problems with the tires and that recalls were unwarranted. Note that these recalls were undertaken before recalling the same tires in North America—a fact not lost on consumers and commentators when the salient facts began to surface. A TV station in Houston, Texas, KHOU, aired a 10-minute story on the tread separa- tions on tires on Ford Explorers in February 2000. They gave the 800 telephone number for the NHTSA, and complaints started to roll in. The news secrecy bubble had finally burst in the United States, and on March 6, the NHTSA began its initial evaluation of Firestone tires.13 Subsequent analysis of Firestone warranty claims and other data showed a high accident rate for the tires and led to the recall on August 9. Again, actions were in response to public pressure. Findings were ultimately identified, in part, from Firestone warranty data that could have been assessed much earlier. Whose responsibility should that have been? Who would have benefited? On Fri- day, July 28, 2000, Ford engineers picked up the Firestone warranty data and then set up a “war room” at Ford headquarters in Dearborn, Michigan.14 Working with Firestone personnel, after ten long days the investigators decided that “the prob- lem tires appear[ed] to have come from the plant in Decatur, Ill., during specific periods of production. The bulk of the tire-separation incidents had occurred in hot states: Arizona, California, Florida and Texas. This correlated with information from overseas.”15 “The rate of warranty claims on tires for Explorers surged in the mid-1990s, and the bulk of them involved tires made at Deca- tur. For the three years from 1994 through 1996, tread-separation claims attributed to ATX tires produced at the Decatur plant came in at rates ranging from roughly 350 to more than 600 tires per million. During the same years, tires of the same model produced at all other Firestone plants had claim rates of 100 per million tires.”16 At least two factors may have contrib- uted to these higher tread separation rates at Decatur. First, in preparation for a product liability suit in Florida, a retired worker has sworn that he saw inspectors pass tires with- out inspecting them on a daily basis in 1993 and 1994.17 Second, Firestone used 2,300 scab or replacement workers when United Rubber Workers local 713 went on strike from 1994 to 1996. After the very acrimonious strike was settled, Firestone made the scab workers permanent hires.18 An interesting question remains: Did Firestone fully appreciate and manage these risks effectively? Misunderstanding the Risks Perhaps the tread separation problems were found earlier and actions were suppressed in the United States due to concerns over potential legal ramifications and ensuing costs. Unfortunately, this is probably a correct line of reasoning, and it reflects an erroneous understanding of the significant risks of delay in dealing with a product safety matter. Specifically, delay in dealing with a product safety matter can lead to a serious erosion of reputation and confidence among customers and result in a loss of future revenues and profits. Frequently, the cost of opportunities lost is the largest item to be taken into account in a cost–benefit analysis of the decision to recall a product. Moreover, failing to remedy a problem at the earliest point of recognition can lead to an inflation of the number of claims and the cost of satisfying them. If the executives had seen the cost–benefit analysis in the accompanying table, they would have seen the logic in speeding up their analysis and recognition of the tread separation problem. Using an Ethical Decision-Making Framework Had Ford and Firestone executives used an ethical decision-making framework such as those discussed in Chapter 5, they would have recognized the risks allowing legal defense strategy to dominate their thinking. Moreover, they might have considered the application of alternative remedies, such as the use of a nylon cap or safety layer between the steel belts and tread to keep the ends of the belts from chafing the tread rubber and contributing to tread separation. The nylon cap was apparently used in late-production Firestone tires in Venezuela at a cost of $1 per tire. According to engineers, the extra cost was the only reason not to use them widely.19 Bridgestone does use them on some tire lines, as does Pirelli on nearly all of its U.S.-market tires.20 The Aftermath Not surprisingly, the sales of Ford Explorers dropped, as did Firestone’s sales. In Venezuela, for example, Ford Explorer sales dropped 37% in 2000. In December 2000, Saudi Arabia banned new and used vehicles with Firestone tires. Firestone announced that it believed the ban was unjustified.





Both the U.S. Congress and Senate held hearings, and a new act was passed on October 11, 2000, called the Transportation Recall Enhancement, Accountability, and Documentation Act. The act does the following: • Strengthens the reporting requirements for manufacturers of motor vehicles and motor vehicle equipment (including the reporting of defects first discovered in a foreign country) • Increases the civil penalties for violations of safety regulations (e.g., fines for certain violations of Title 49 were raised from $1,000 to $5,000 for each violation, and the maximum penalty for a related series of violations was raised from $800,000 to $15,000,000) • Provides additional criminal penalties (e.g., for any knowing and willful false statement that was intended to mislead NHTSA with respect to a defect that causes death or grievous bodily harm, the possible prison term was raised from five years to 15) • Requires NHTSA to revise and update its safety standards for tires • Increases the number of years that a defect must be remedied without charge to the owner (from three years to five for tires) • Increases the authorization for funding the NHTSA • Requires the secretary of transportation to report to Congress within a year on the criteria, procedures, and methods that the NHTSA uses in determining whether to open an investigation of a possible defect • Contains other safety-related provisions21 Questions 1. Why didn’t Ford and Firestone learn from their past recall debacles? 2. Why did Ford, Firestone, and the NHTSA not discover the nature and seriousness of the tread-separation, product-liability problem earlier? 3. Why did Ford or Firestone not report the problem to U.S. authorities earlier? 4. Ultimately, which was the largest cost to Ford and Firestone: fines, lawsuit settlements, or the loss of reputation leading to loss of future revenue and profits? 5. What errors should be corrected in the cost–benefit analysis presented? 6. What were the ethical risks, if any, involved in this tire recall situation? 7. If you were advising Ford and Bridge- stone, what should each include in their risk management program?