VELASQUEZ

Business Ethics. Concepts and Cases, 6th edn, pp. 288-291

The Ford / Firestone Debacle

Introduced to the market in 1990, the Ford Explorer quickly became the most popular SUV in
America. SUVs, which are designed to travel off-road, are built high off the ground to clear
rocks and other obstructions underneath. Marketed as a spacious, safe, and reliable four-wheeldrive vehicle for the family, it fulfilled consumers desire for ruggedness combined with comfort.
Between 1990 to 2000, the Explorer proved to be among the safest SUVs on the road, with a
lower rate of fatal accidents than 9 of 11 other SUVs. According to Ford, US Department of
Transportation data showed that the Explorer fatality rate is 27% lower than passenger cars
overall and 17% lower than other SUVs. SUVs, however, have much higher rollover rates than
sedans because in a sharp turn at highway speeds their higher center of gravity lets them roll over
more easily. Unlike their sedans, however, which had a profit margin of $1,000 per vehicle,
Fords profit on Explorers was about $8,000.
Fords engineers designed the Explorer to use the same truck frame as its older Ranger
pickup so it could be manufactured on the same assembly lines. The Ranger truck frame used a
Twin I-Beam front-wheel suspension consisting of crisscrossing beams on top of each other,
which increased the space beneath the car but raised the vehicles center of gravity. The same
suspension had been used in the very popular Bronco II SUV, which, by the late 1980s, was the
subject of more than 800 lawsuits for rollovers attributed in part to the high center of gravity
resulting from having to place the engine above the Twin I-Bean suspension. In June 1989,
Consumers Union tested the Bronco II by simulating rapid lane changes and found it was prone
to roll over. The finding was published in Consumer Reports, where the Union recommended
that consumers should avoid buying Bronco II, a recommendation that was subsequently widely
publicized and that affected sales of the Bronco II and damaged Fords reputation for safety. The
Consumers Union report surprised Ford, and the company subsequently embarked on a strategy
to reposition itself as the industrys most socially and consumer-focused automaker, staking its
future on creating a reputation for honesty and fairness.
Like the Ranger, the use of the Twin I-Beam suspension in the design of the Explorer also
gave it a high center of gravity, and test reports in 1998 showed the Explorer had an even greater
tendency than Bronco II to lift two wheels off the ground in a turn at 55 miles per hour, which
could result in a rollover. In sharp J-turns the Exp rolled in 5 of 12 tests, more than the Bronco
II. This was a major concern to Ford engineers because, as one of them wrote in a memo, passing
the Consumers Union test became an implicit requirement for Explorer due to the potential for
adverse publicity. In a June 15, 1989 memo to Ford management, Fords engineers suggested
several design changes that could improve the vehicles stability: mounting the wheels 2 inches
farther apart, lowering the engine, replacing the Twin I-Beam suspension, lowering the tire
pressure, and stiffening the springs. Ford management rejected the more fundamental redesign
options of settings the wheels farther apart, lowering the engine, or replacing the Twin I-Beam
suspension, all of which would have delayed the planned 1990 launch date. Instead they chose to
install stiffer springs, shorten the suspension, and lower the tire pressure, changes that would not
affect the launch date. In 1995, Ford would replace the Twin I-Beam suspension with a new one
(which, because it was lighter, had the effect of further raising the Explorers center of gravity).
The tires for the Explorer were manufactured by Firestone for Ford, who in the 1980s has
requested a tire that combined characteristics of a truck tire with passenger tire performance and
certain price specifications. Firestone developed the ATX tire (and later the ATX II), which had
previously been used on the Ranger, and modified to meet Fords specifications for the Explorer.
Firestone recommended a pressure of 30 to 35 psi (pounds per square inch) for the 15-inch tires.

When stability problems developed on the Explorer, however, Ford engineers recommended
telling buyers of the Explorer to keep the tires inflated to a pressure of 26 psi, which, together
with the other design changes, should increase the Explorers stability. The less-inflated tires
would hold the road better but lowered fuel economy, so Ford negotiated with Firestone, who
agreed to refine the ATX design to somewhat increase the mileage, specifically by reducing the
tires weight about 3%. Around 1994, Firestone would again change the tread design on the ATX
and rename it the Wilderness AT Tire. Ford began selling the Explorer with the ATX (and ATX II
and, later, the Wilderness AT) and recommended that owners maintain their tires at 26 psi instead
of the usual 30 psi.
Firestone had a long and close relationship with Ford that dated from 1896 when Henry
Ford, the founder of Ford, first bought tires from Harvey Firestone, the founder of Firestone Tire
and Rubber Co. In 1973, when Firestone was the second-largest US tire manufacturer, Ford
requested the Firestone switch to the newly developed steel-belted radials for its 1974 cars and
trucks. Radials, which put a band of woven steel around the tire underneath the tread, lasted
twice as long as standard tires and had better handling and gas mileage but took longer and were
more difficult to manufacture. Firestone was able to comply with the request, however, and by
1975 was providing the tires Ford requested. In 1978, however, failures of Firestones leading
steel-belted radial, the Firestone 500, were found to be involved in hundreds of accidents and
injuries, including 34 deaths. Although claiming that the problem was that motorists failed to
keep their tires properly inflated, Firestone agreed to recall 14.5 mil Firestone 500s, a recall
estimated to have cost $160 million and to have substantially damaged the companys reputation
with cosumers. Over the next 10 years, the companys legal and financial problems continued to
mount in spite of drastic cost cutting and closure of seven tire plants. The tire industry was
mature, highly competitive, and sold a commodity product over which manufacturers had little
pricing power, and growth had slowed because new designs had substantially increased tire life.
By 1987, the company realized that intense price competition made future profit growth virtually
impossible and that any additional cost cutting would only cut into its core research and
manufacturing capabilities. In 1988, Firestone was up for sale and on March 17 the company
agreed to be purchased for $2.6 billion by Bridgestone, a Japanese tire company that needed to
establish production facilities in the US and that, with 19% of the worlds tire market and
revenues of $18 billion, was the worlds leading tire maker.
From the beginning, communication between Bridgestones Japanese managers and
Firestone was poor. Bridgestone, whose modernized Japanese facilities and highly efficient
production had won it the coveted Demin Prize in 1968, had a reputation for carefully testing its
products and espoused a philosophy of serving society with products of superior quality. The
company treated workers as family, providing them with lifetime employment, and had little
experience with unions, which were traditionally weak and rarely went on strike in Japan.
Bridgestones Japanese managers were puzzled by American workers who did not share the
typical Japanese workers devotion to the company. Yoichiro Kaizaki, the Japanese manager put
in charge of integrating Firestone with Bridgestone, tried to introduce Bridgestone quality
standards into Firestone but was largely ineffective and later commented that the inability to
Bridgestonize was a problem. In March 1993, Firestones day-to-day operations were put in
the hands of John Lampe, an American, and Bridgestone let Firestone operate more or less on its
own.
Under Lampe, Firestones operations improved but on July 1994 some 4,000 United Rubber
Workers (URW) union members went on strike at five Firestone plants, including its plant in
Decantur, Illinois, where a large percentage of the Explorers tires were made. Seven months into
the strike, Firestone hired 900 nonunion workers to permanently replace striking workers at its
Decantur plant, a move the union claimed would put unskilled and untrained workers on the
assembly lines. The rancorous strike continued until Firestone and the union reached an
agreement in December 1996. The strike had run for 2 years and deeply embittered union

workers, who were financially devastated by the strike and many of whom did not return to their
jobs. Nevertheless, Bridgestone and Firestone prospered, and between 1993 and 1999
Bridgestone doubled its profits and captured 23% of the US market. 40% of Firestones new car
tire revenues were sales to Ford.
Problems with the Explorer and its ATX and Wilderness AT tires began to emerge in 1993
when five lawsuits were filed alleging that the tires when mounted on the Explorer were prone to
catastrophic failures that resulted in rollovers on the high vehicle. Firestones own warranty
claims data indicated that the tread sometimes separated from the tires and peeled off,
particularly in hot regions such as Arizona, Texas, and Florida, but the claims rate of 0.01% was
extremely low. In 1996, the Arizona Game and Fish Department complained to Firestone about
several tread-separation incidents on its fleet of Explorers, but Firestone inspectors were not able
to find the cause. While the number of lawsuits and warranty claims increased each year,
discussions of these were confined to the legal and financial departments within Firestones
because, as Gary Crigger, a Firestone executive, explained: Claims and lawsuits are not
considered to be representative throughout a line. They are considered to be individual cases that
occur for a variety of reasons. So they have never been part of [the product] performance
evaluation.
In late 1997, Ford was contacted by a company in Saudi Arabia whose tires on its fleet of
Explorers had suffered repeated tread separations, and Ford agreed to replace the tires. The
following year, Saudi Arabia, Kuwait, and other Middle-Eastern nations reported additional
rollover accidents caused by tread separation, resulting in 14 deaths. After discussions with
Firestone, in September 1999 Ford, on its own, replaced the Wilderness AT tires with Goodyear
tires on Explorers in the Middle East. Firestone insisted that Ford call this a consumer
satisfaction program and not a recall, which might trigger a large recall in the US and other
countries. Firestone also refused to participate in the replacement, claiming that in the Middle
East drivers deflated the tires to drive on sand and the accidents had been caused by
underinflation and driving at extremely high speeds; its own studies in the US, it said, had found
no problems with the tires. The tires themselves, they said, were not defective.
In 1999, Ford was notified of 100 tread-separation incidents and 47 fatalities linked to
Firestone tires on Ford Explorers in Venezuela. Firestone again said that the tires were not
defective and that the accidents were due to unique conditions in Venezuela high
temperatures, fast driving, and rough roads. Nevertheless, Ford replaced the Firestone tires on
40,000 Venezuelan Explorers with Goodyear tires, again calling this a consumer satisfaction
program and not a recall.
In February 2000 when a Houston television station aired a program on Explorer rollover
accidents, the US National Highway Traffic Safety Administration was inundated with calls from
consumers who had been involved in similar events. In May 2000, the NHTSA notified Ford and
Firestone that it was launching an investigation of Firestone ATX, ATX II, and Wilderness AT
tires after receiving 193 complaints including 21 fatalities that the rubber came off the tire
casing. Ford and Bridgestone agreed to cooperate with the probe and began their own
investigation. After examining their claims reports, Ford and Firestone found that treadseparation claims had been on a steady upward trend during the past several years, particularly
with tires made at the Decantur plant, whose annual claim rate was 3 to 6 times greater than at
other Firestone plants.
On august 9, Firestone and Ford notified the NHTSA that they were recalling 6.5 million
tires, which consumers could exchange for new Firestone tires at any Firestone store or Ford
dealership. Over the next several days, Firestone stores were packed with consumers asking for
new tires, many of whom were frustrated to find that there were not enough tires available to
meet the sudden deluge of requests. On August 16, Firestone announced that it would give
consumers $100 for each recalled tire they brought in, which they could use to purchase any
brand of replacement tire including competitors tires.

On October 9, 2000, a study concluded that Explorers had a higher rate of tire failures than
other SUVs whether equipped with Firestone tires or Goodyear tires, implying that the fault lay
with the Explorer rather than with the tires. Ford criticized the study, saying that it improperly
compared the mid-size Explorer to both large and small SUVs and that the data set was too
small. The previous months several former Firestone employees had testified at congressional
hearings that during the 1995 strike at Firestones Decantur plant, shoddy workmanship and poor
quality control were rampant, undoubtedly contributing to the poor quality of the tires produced
there.
As the end of 2000 approached, Fords stock had lost 15% of its value and Bridgestones had
lost 50%. Ford sales fell by 6%. Consumer surveys reported a drop of 40 to 50% in consumers
confidence in the Firestone brand, and Bridgestone reported at the end of the year that 2000
profits were down 80% due to expenses related to the recall. Firestone announced plans to close
the Decantur plant.
In May 2001, Ford announced that it had lost confidence in Firestone and would no longer
use its tires on the Explorer. At the same time, Ford announced it would recall an additional 13
million Wilderness AT tires in spite of Firestones strong objections that those tires were not
defective. Ford also pledged to redesign the 2002 Explorer with a wider wheel base, lower
suspension, and electronic stability and traction controls. The total cost for Ford of all its recalls
was estimated to be about $3 billion. The cost of the recalls and legal settlements for Firestone
was estimated at $750 million, and its sales had declined by 40%. By the end of the year,
NHTSA had counted 175 deaths and about 500 injuries related to the Explorer and its Firestone
tires in the US alone. Hundreds of individual lawsuits were being filed against both Ford and
Firestone, and class-action suits were begun in virtually every state in which their products were
sold.
On February 2, 2001, an independent study commissioned by Firestone was released. The
study concluded that the tires had failed when internal cracks developed on the edge of the tires
and spread inward between the two steel belts around the tires. The spread of the cracks was
hastened by a number of factors, including climate, tire design, usage, and manufacturing
differences at the Decantur plant. In October 2001, NHTSA released its own report on the
Firestone tire failures. According to NHTSA, radial tires typically are manufactured with a thick
strip of rubber near the two edges of the tire to suppress cracks. The ATX and Wilderness AT
tires, however, used a thinner strip of rubber than is usual and this thinner wedge was not
sufficient to resist the initiation and propagation of belt-edge cracks between the steel belts.
The rubber layer between the two steel belts was also thinner than in comparable tires and this,
too, may be partially responsible for the relatively low peel adhesion properties of the tires.
Finally, the tires also exhibited weak spots around the circumference leading to the initiation
and growth of cracks earlier than in competitor tires. Firestones own internal study also found
that a low inflation pressure of 26 psi increased the driving temperature of the tires and this
further weakened them, particularly in high-temperature climates and during prolonged driving
at high speeds with heavy loads. Failures seemed to occur most often on the left rear tire of the
Explorer, suggesting that the Explorers design may have had something to do with the failures.