Ford and Firestone's Tire Recall: The Costliest Information Gap in History
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 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 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 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 to 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.
The National Highway Traffic Safety Administation had reported in 2003 that it found the Explorer no more rollover-prone than other SUVs. Even so, the Explorer had been the target of hundreds of product liability lawsuits since the tire controversy began. As of February 2004, Ford had successfully defended the Explorer in ten consecutive jury trials. However, the company has not disclosed how many lawsuits had been forced to defend because of defect allegations, nor how many cases have been settled out of court. Despite its success in court, the Explorer is likely to remain a magnet for lawsuits.
On February 26, 2004 Bridgestone/Firestone announced the recall of 297,000 of its Steeltex Radial A/T tires mounted as original equipment on Ford Excursion SUVs between 2000 and 2003. Firestone was prompted to make the recall by the results of new federal reporting requirements instituted after the 2000 Ford/Firestone recall problem to help regulators identify safety problems more rapidly. Data on warranty claims, crashes, and injuries that Firestone had submitted to the NHTSA in December 2003 disclosed three recent accidents that had led to five deaths and four other accidents that led to injuries. Firestone called their action a "voluntary safety campaign." Joan Claybrook, head of an auto-industry watchdog group, predicted many more recalls in the future as NHTSA sifts through claims data submitted by auto makers and their suppliers.
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