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Peeling Apart
Facing Falling Sales And Legal Jeopardy, Ford
Splits With Firestone And Orders A Big Tire Change.
Author: Keith Naughton and Mark Hosenball
Edition: U.S. EDITION
Section: National Affairs
Page: 38
Article Text:
The confrontation began as soon as the executives from
both companies filed into the conference room at Firestone
headquarters last Monday. Why, Firestone CEO John Lampe
demanded, had Ford been leaking damaging information
to the press about Firestone tires? And was the automaker
about to go public with demands for another tire recall,
one that would further tarnish Firestone's reputation?
The Ford executives were circumspect, claiming they
had not yet made such a decision. But for the next two
hours, Ford's chief engineer presented page after page
of data, arguing that millions of Firestone tires still
on Ford Explorers were prone to shredding. Firestone
fired back with its own carefully prepared documents
that raised questions about the Explorer's stability.
After four hours of tense finger-pointing, neither side
would relent. Signaling an end to the meeting, Lampe
pulled out a letter and handed it to Ford vice president
Carlos Mazzorin. "I'm sorry to have to do this,"
Lampe said. "But at this point we've got to break
our relationship with you."
So ended a 96-year partnership that began with Harvey
Firestone selling tires to Henry Ford for the new Model
T. The rupture seemed inevitable since last year when
both companies came under intense fire for their involvement
in a series of deadly rollovers. And now they face mounting
legal and financial pressures. More than 700 injuries
and 174 deaths have been linked to Firestone tires'
losing their tread at high speeds; most involved Ford
Explorers, America's top-selling sport utility vehicle.
Last summer Ford and Bridgestone/Firestone jointly initiated
a recall of 6.5 million tires that focused on two models
of Firestone tires that had been implicated in the rollovers.
At the time Ford said its other Firestone tires were
safe. Now Ford says it has new evidence that there are
problems on other Firestone tires still used on its
SUVs and pickup trucks. The day after the breakup at
Firestone's Nashville headquarters, Ford announced it
would spend a staggering $3 billion to replace all 13
million Firestone Wilderness AT tires on its Explorer
and Expedition SUVs and its F-150 and Ranger pickups.
"This decision is a painful one for me personally,"
Ford chairman William Clay Ford Jr., great-grandson
of both Henry Ford and Harvey Firestone, told a room
packed with reporters at his company's Dearborn, Mich.,
headquarters.
Painful, but necessary. Since the Firestone crisis
began, Explorer sales are down more than 20 percent.
That's a big problem for Ford, since the Explorer is
the company's most important model, accounting for about
two thirds of profits. Ford's decision to expand the
recall is part of an attempt to jump-start sales on
the struggling brand. Ford officials acknowledge that
the redesigned 2002 Explorer is not meeting its sales
goals. As a result, Wall Street is turning gloomy on
Ford, cutting forecasts for the company's profits. What's
more, Venezuelan authorities are considering banning
Explorers because the SUV continued to suffer fatal
rollovers after replacing its Firestone tires with other
brands. And looming on the horizon, Ford is facing hundreds
of wrongful-death lawsuits, including a huge class-action
suit. By initiating this latest recall, lawyers say,
Ford is hoping to impress future juries and head off
hundreds of millions of dollars in punitive damages
in court. Says Texas lawyer Randy
Roberts: "They will face much less jury
anger if they can say: 'We tried to do something'."
For Firestone, the stakes are even higher. The butt
of jokes for months, the company was dubbed "Tombstone"
last week by Jay Leno. Indeed, some plaintiffs' lawyers
say Firestone has been urging settlements by warning
darkly that its U.S. operations could go bankrupt. A
Firestone spokeswoman says that "the company has
a sound financial base that's sufficient to weather
the current situation." But other automakers are
already avoiding the company. GM says it is dropping
Firestone tires from several of its SUV and car models
over the next year, in part to allay consumers' fears.
Nissan will no longer feature Firestone tires on its
Altima sedan when a redesigned version launches this
fall. In addition, NEWSWEEK has learned that Ford CEO
Jacques Nasser is considering asking Firestone to help
pay for the cost of the latest recall. Nasser floated
this notion to several congressmen, according to Capitol
Hill sources. A Ford spokesman said reimbursement by
Firestone "is not on our agenda at this time."
Nasser did, however, send a letter to Lampe last Tuesday,
asking that the companies "work cooperatively"
on the recall. But Lampe dismisses the recall as "a
fruitless exercise." "Why replace good tires
with good tires?" he told NEWSWEEK.
The notion that the former partners could work "cooperatively"
evaporated last week as both companies came out swinging.
Ford told congressional investigators of its new analysis
that found that Firestone tires still on the road fail
at a rate three times greater than other brands. That's
not as bad as the tires recalled last year, which were
up to 40 times as likely to have their tread unravel
on the highway. "We simply do not have enough confidence
in the future performance of these tires keeping our
customers safe," Ford's Nasser said. Firestone
quickly returned fire by making public its data from
the Nashville meeting that showed Explorers were more
likely to roll over after a tire failure than other
SUVs. (Ford contends the opposite is true.) And Firestone
executives attacked the motives of its former No. 1
customer. "They are trying to divert attention
away from the Explorer and trying to convince people
this is only a tire issue," Lampe said. "Rollovers
are a vehicle issue, and that's got to be addressed."
The public bickering between Ford and Firestone is
a source of glee to the lawyers who are suing the companies.
"They're shooting at each other instead of shooting
at me," crowed Roberts,
who has settled six cases with the companies and is
pursuing three more. "They tried to stay united
over the past year, but now it looks like outright war.
This will make a world of difference in the courtroom."
But whether Ford's drastic action was necessary is
far from certain. Congressional sources tell NEWSWEEK
that Ford's recall does not appear justified by preliminary
findings from a yearlong federal probe into Firestone
tires. The evidence of tire flaws provided to federal
investigators by Ford and Firestone is not serious enough
to trigger a government-ordered recall, the sources
say. "Ford's motivation is to get this all behind
them," says consumer advocate Joan Claybrook, U.S.
auto-safety chief in the late 1970s, at the time of
the biggest tire recall ever. "They ran the numbers
and figured this would have a great PR effect by sending
the message that they're concerned about safety.'' Ford
contends its only motivation is to safeguard its customers.
Christy Sagrista isn't buying the spin. Her 2-year-old
son Alex died in an Explorer that rolled over after
its Firestone tires blew apart along Florida's Turnpike
two days before Thanksgiving in 1999. Injured in the
accident herself, Sagrista couldn't attend her son's
funeral. Her grief turned to anger when she learned
last summer that the tire in her accident was not among
those recalled. Now that all Firestone tires are coming
off Explorers, Sagrista is relieved, but she doesn't
forgive the companies she is suing. "Ford and Firestone
are like two chemicals that are unsafe alone,"
she says, "but put them together and they explode."
By divorcing, Ford and Firestone hope to diffuse such
sentiments. But traveling the road to recovery alone
is not likely to be much easier for either one.
© 2001 Newsweek, Inc.
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