The Ford – Firestone Case

Myra Ann L. Wee-Toe Hio

Ateneo de Davao University

MBA:Business Ethics

Professor Oliver Victoriano

July 31, 2020

I – Executive Summary

In 1996 and 1997, there was an increase in insurance claims due to accidents caused

by rollovers of Firestone tire fitted Ford Explorer vehicles. The accidents, which resulted in

fatalities, were caused by tread separation, which led the tire to explode and the vehicle to

rollover. In August 2000, Firestone announced a recall of 6.5 million Firestone Wilderness,

AT, ATX and ATX II P235/75R15 tires (all 15" tires) which included tires in the originally

equipped Ford Explorer (model years 1991-2000). Once one of the most admired companies

in the United States and slated to celebrate its 100 th anniversary, Firestone now face a major

blow to its market and reputation. This case analysis will focus on the Firestone company

and how it should position itself to regain its foothold in the consumer tire market, and will

not delve into issues relating to Ford Motor Company.

II – Problem Statement

The decision to recall Firestone tires will have negative impact on

Bridgestone/Firestone. How should Firestone position itself after the recall and solve the

issues that contributed to the recall?

Inconclusive Data

There is no conclusive evidence that Explorers equipped with Firestone tires are

more prone to experience rollover accidents. Data supporting increased rollover incidents of

Firestone fitted Explorers is shown in Figure 3 of the Appendices. This federal data shows

that the Ford Explorer experienced more than 50 tire-related accidents per 1,000 fatal

accidents in the year 1999, compared to other SUV’s, with only about 9 tire-related

accidents per 1,000 fatal accidents in 1999. However, there is contrary data that support

otherwise. The US Department of Transportation data shows that fatality rate per 100

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million miles of vehicle travel is 1.6 for passenger cars, 1.3 for all compact SUVs and 1.0 for

the Explorer (Pinedo, Seshadri & Zemel, 2000, pg. 7). Second, the Explorer average 0.6% of

total rollovers in 1999, while it accounts for 2% of the light-truck market. Third, according to

the Institute for Highway Safety, among the large SUVs from 1995 to 1998, the number of

rollover fatalities per 1 million registered vehicles are:

No. of Rollover Mid-size No. of Rollover

Model
Fatalities Models Fatalities
In
Explorer 26 2-door
51
Explorer
GMC Jimmy 34 Jeep Grand
23
Cherokee
Chevy T10 45 Chevy T10 112

addition, Claybrook, the former NHTSA administrator states that it is difficult the evaluate

the statistics and the case against Firestone installed Explorer, mainly because federal

database records only vehicle type, and not tire type. However, in response to consumer

complaints, Ford, in 1997 and 1998, did replace Firestone tires in the Middle East,

Venezuela, Thailand and Malaysia.

Outdated Tire Design and Testing

Excessive heat allegedly caused tread separation in Firestone tires, resulting to

rollover and fatalities. European manufacturers reinforced tire strength by adding an extra

nylon reinforcement, which practice was also adopted by Goodyear in the US. Excessive

heat, mainly caused by driving conditions, was also aggravated by the width of the tread as

well as the square corners of the tread design. The testing of tires by Firestone did not

involve testing them on actual conditions and actual vehicle on which they would be

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installed on. This was instead done by the car manufacturer, i.e. Ford, which in this case,

used a Ford pick-up to test the tires as the Explorer was not yet ready at the time of testing.

Quality Control & Labor Issues

Firestone’s poor quality control over some of its plants is reflected in the higher than

average claim rate per million in the Decatur plant compared to its Wilson and Oklahoma

plants in the years 1996 and 1997. The labor issues in the Decatur plant, the 7-day 12 hour

work shifts, the poor process control, the non-standard operating procedures, as well as its

antiquated method of building tires by hand all contribute to the poor quality control in the

plant, hence the higher claim per million tires produced.

Ford Explorer’s Flawed Design

Although a popular SUV, the Ford Explorer suffered from design flaws that related to

safety, and the Ford company seem to know of the possible flaws but decided not to make

these known. The Explorer descended from the Ford Bronco, which had rollover propensity

due to its heavy duty twin I beam, resulting in a higher than normal center of gravity design.

A memo even details that no written report may be made regarding test results concerning

the Explorer and or its tires and that such experiments must always be done in the presence

of a Ford employee. The tire inflation rate which was used to mitigate this issue became a

point of contention, with Firestone recommending 30 pounds to decrease tire temperature

and Ford recommending 26 pounds to decrease the vehicle’s center of gravity. In addition,

there was also the issue on its front sway bar which made it more susceptible to rollover. In

2001, the Ford Motor Company redesigned the Explorer.

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 Aside from safety concerns, the original equipment market for tires is very price

sensitive and the supplier with the lowest cost wins the contract, which, in this case,

compromised consumer safety. Although Ford partially replaced Firestone and equipped the

Explorer with Goodyear tires in 1996 and 1997, Ford eventually switched back to Firestone

due to the lower cost. However, from 2002 onward, the Ford explorer was going to be

equipped with Michelin tires, and no longer with Firestone tires.

IV – Objectives of the Study

This paper seeks to mitigate the damage inflicted upon the Firestone company and

seek solutions to restore the reputation and market share that it will lose due to the

accidents resulting in the recall.

The data presented in the case does not show with conclusive evidence that

Explorers fitted with Firestone tires cause more fatalities. In fact, there are government

agents who deny that there is sufficient evidence and thus did not order a recall. The recall

is initiated by Firestone due to mounting pressure from consumers and the press. Firestone

should capitalize on this by offering the recall as its initiative to finally set to rest any safety

concern that its customers may have in using the Firestone tires. It should use an aggressive

approach in the recall program by ensuring that instead of negative press, customers will

instead feel valued resulting in positive feedback from customers and eventually even

create brand loyalty from the recall experience with Firestone.

It cannot be denied that Firestone has lost the original purpose of its existence. It has

become a company focused on short term financial gains mounted by pressure from its

shareholders. As a result, it has lost focus on making and designing tires. Adding an extra

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layer of nylon seems to have become an industry standard, but Firestone did not adopt to

this new innovation, much to its detriment. Moreover, testing is not seen as an important

activity because there were no corrective actions undertaken when results of its tests

showed that the tires manufactured had flaws even before leaving the factory doors. It

should therefore aggressively put in place a technical group to re-examine its tire design

with a focus on safety taking to consideration the driving environment as well as the

characteristics of vehicles that the tires will be installed in.

Labor issues in its Decatur plant is another telltale sign of an organization which has

abandoned its people and its focus. With disgruntled employees, poor quality tires were

produced. There were haphazard methods implemented to solve manufacturing issues,

which led to higher claims. Starting with the establishment of modern plants that would no

longer rely on hand made tires, the company should also focus on the needs and complaints

of its employees. Instead of looking at them as mere workers, the company should look at

them as partners in the making one of the best tires in the market with safety rating that is

second to none.

Ford and Firestone had a long working relationship that was not nurtured and left to

falter. Indeed there were design issues and flaws with the Explorer, however, the lack of

effective communication of the optimal tire pressure between the two companies failed to

lead them to a solution which could have mitigated at least some of the fatalities. Firestone

should have a more pro-active relationship with its customers and end users, otherwise, it

will lose focus by forgetting who it is that they serve.

Firestone failed to take notice of its mounting insurance claims even when such data

was evident in its 1999 annual report. Masked by its strong market share, Firestone was

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focused on revenue numbers and growth and failed to act on a control issue that was

evident from the financial report, another indication that the leadership was not sensitive to

the changing tide which was evident and could have prevented the negative press that

ensued.

V – Situational Analysis - SWOT Matrix

Strengths-Opportunities Strategic Options Weaknesses-Opportunities Strategic Options

(Offensive and Proactive Actions) (Defensive and Proactive Actions)

Firestone should re-establish itself as one Firestone’s foreign (Japanese) leadership

of the best run companies with almost a makes it less in tune with the culture of the

hundred years of history , and local American market. It should install

communicate to the public that the recall strong local leaders who have the power to

is self-initiated for the purpose of make changes in light of the situation

protecting its customers and its presented.

reputation, even if it would cost the

Aside from Goodyear, Michellin is also
company billions of dollars. It should also
European and may face similar cultural
work to maintain its relationship with
issues when dealing with US companies.
Ford and other loyal dealers, looking for

ways to once again supply the Explorer

with originally equipped Firestone tires.

Strengths-Threats Strategic Options Weaknesses-Threats Strategic Options

(Offensive and Reactive Actions) (Defensive and Reactive Actions)

Firestone’s tire sales in the US is 5.6 Firestone should invest in re-establishing a

billion, a big amount when compared to culture that focuses on excellence and

the sales that would be affected by the maintaining a clear focus on its core tire

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 recall.1 This strong industry position and market by closely tracking the competition

strong supplier relation with Ford and and advancements in the tire manufacturing

other car manufacturers must be further industry. It should also change to a bottom

strengthened together with its multi- up capital budgeting process instead of the

brand strategy to avoid erosion of its top down budgeting process in order to

market share through aggressive tire re- meet the issues faced on the manufacturing

design, marketing and public relations floor as well as by its customers.

program.

VI – Strategic Alternatives

A. Re-establish Firestone’s reputation as one of the best run companies in the United

States.

This strategy requires an aggressive public relations campaign to re-establish Firestone’s

reputation as well as re-design of its product to increase its safety feature.

i. The recall should be handled by trained Firestone personnel to explain to its

customers that the recall was not mandated by the government as the data is

inconclusive to require a recall, and that the company is recalling the tires to

once and for all remove safety concerns of its customers.

ii. A technical team should be formed to evaluate the design of the tires involved in

the recall, including the safety advantage of adding the extra nylon

reinforcement practiced by European manufacturers.

iii. The team will also design a suitable replacement tire design for the Ford Explorer

original equipment market by removing the previously identified hazards. With

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Pinedo, Seshadri & Zemel, 2000, citing Business Week, Sept 18, 2000, note number xxix.

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 the new design, it should work its way back to be the tire supplier for Ford Motor

Company, and specifically for the Ford Explorer.

iv. The company has to evaluate its existing factories to adopt to new

manufacturing practices that will ensure consistent procedure and quality.

v. The company should work with its existing distribution chain and design an

aggressive marketing strategy to regain the replacement market which was

eroded by the recall.

vi. There is a need to install local leaders who should be oriented not only to the

primary stakeholders but to the secondary stakeholders as well. Product safety

should be their utmost consideration, as well as employee concern, the company

should also re-establishing good working relationship with their main customers,

i.e. car manufacturers and the various distribution network.

vii. Employee loyalty should be fostered by ensuring that employees feel valued by

hearing their complaints and suggestions, and are not left on their own, far and

removed from company headquarters.

viii. The company should revisit its inventory planning and decide the best alternative

for its stockpile of tires it currently has, with product safety as its utmost

concern.

B. Replace the 15 inch tire segment with the Bridgestone brand.

i. This strategy applies all the strategies in A, but instead of continuing to use the

Firestone brand in the 15 inch tire segment, the Bridgestone brand will be used.

This strategy circumvents the need to re-establish the Firestone brand in the 15

inch tire segment by immediately replacing them with the Bridgestone brand,

which is seen as a more premium brand. Although a quicker solution, it does not

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 solve the erosion of the Firestone brand, which will not only affect the 15 inch

tire segment, but will also have negative effects in its other tire-size market

segments.

C. Replace the 15 inch tire segment with the Dayton brand

i. Similar to strategy B, but instead of using the Bridgestone brand, the Dayton

brand will be used. Its standing in the more economical market segment will

attract price sensitive buyers and car manufacturers. This solution will also leave

the Firestone brand to erode into its other tire-size market segment, which is a

waste considering the reputation of Firestone that it has already built in the

market.

VII – Analysis and Conclusion

This study seeks the best position for Bridgestone/Firestone to take in light of the

recall situation that it finds itself in. The company has to realize that cutting cost in the short

term only results in higher long term costs in terms of product liability and recall. In order to

regain its reputation as one of the best run companies in the US, it should once again have a

stakeholder’s orientation that was the reason for its success in the first place. It had

forgotten its stakeholders and focused instead on numbers to satisfy its shareholders, but

such short sightedness comes at a cost, a cost that it now has to pay. It has to act quickly

with decisive and effective leaders if it wants to recover its foothold in the US tire market.

Otherwise, its demise will be forthcoming.

VIII – Recommendation to Management

Bridgestone/Firestone should implement strategy A because its reputation and

market dominance can still be salvaged out of the situation with an aggressive move by the

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management. Indeed it will be costly, starting with the recall, however the recall will also be

an opportunity for the brand to re-establish its customer base, by ensuring that they will be

satisfied after using the replacement tires. Customer loyalty must be the goal of the recall,

and the company, by applying Strategy A will continue to work towards this by focusing on

solving the issues that led to the recall in the first place.

There is no pressing justification to recommend strategy B at this point because the

Firestone brand can still be re-established at this stage. However, it is admitted that the

Board of Directors may decide that the marketing campaign involved in strategy A may be

too costly and may decide to employ strategy B instead.

REFERENCE

Pinedo, M., Seshadri, S., Zemel, E., (2000). The Ford-Firestone Case. Keibard N. Stern School

of Business, New York University.

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