NEW YORK (CNNfn) - Bridgestone Corp. Wednesday recalled 6.5 million of its Firestone-brand tires -- the second largest tire recall in U.S. history -- in response to complaints the tires may be linked to fatal crashes involving sport utility vehicles.|
The move comes amid intense pressure from major tire retailers, safety advocates and government regulators to pull the tires after receiving reports that the tires may be linked to as many as 46 deaths and hundreds of accidents. It poses the risk of millions of dollars in costs and lost sales for the company.
The reports to the National Highway Traffic Safety Administration allege Firestone treads peel off their casings, sometimes while the vehicles are traveling at high speeds.
Company officials said they do not know the cause of the problem, but are confident that whatever the problem, it is isolated to the tires being recalled.
Garry Crigger, the company's executive vice president said heat could be a contributing factor.
"The vast majority of incidents are in the southern states of Arizona, California, Florida and Texas, which suggests there may be a direct correlation between heat and tire performance," Crigger said. "Most of the incidents we have reviewed indicate improper maintenance or damage to the tires, which is often caused by under-inflation of tires. Under-inflated operation of any tire generates excessive heat, which can lead to tire failure."
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The recall covers size P235/75R15 in all the ATX, ATXII and some Wilderness AT tires that are currently in use on some of the nation's most popular SUVs. The tires have been original equipment on Ford, General Motors, Toyota, Nissan and Subaru vehicles for several years, but most accidents reported to traffic safety officials have involved the best selling Ford Explorer. An estimated 60-to-70 percent of the recalled tires are on the Explorer and its twin Mercury Mountaineer models.
Mounting safety concerns prompted Discount Tire, Montgomery Ward and Sears Roebuck and Co. to stop selling the tires in the last week. But an official with Ford Motor Co. (F: Research, Estimates) said they have confidence in Firestone and that the recall addresses any possible problems.
The company said 14.4 million of the tires have been produced since 1990, and that estimated 6.5 million are still on the road. None of the tires being recalled has been shipped from January, and a Ford official who appeared at the Firestone news conference said she believed none of new vehicles now on dealer lots has been affected.
The recall is the second largest in U.S. history, trailing only a recall of 14.5 million tires by Firestone in 1978. That recall nearly put the company into bankruptcy and led to the subsequent purchase by Japan's Bridgestone Corp. in 1990. Company officials would not estimate the cost of the latest recall, but admitted it would be "substantial."
Cost of recall not disclosed
"Obviously there will be a large financial impact on the company, but that's not our subject for discussion today," Crigger said. "Cost really is not the issue here. The issue is our concerns for customer safety and customer confidence in our brand." (344KB WAV) (344KB AIFF)
A Tokyo analyst who follows Bridgestone has estimated a recall could cost the company up to $500 million. But the loss of confidence in the Firestone brand caused by this recall could end up costing the company more than any immediate cost of the recall or litigation, said David Bradley, analyst with J.P. Morgan.
"I would guess the potential market share loss could be as much as 2 points to 3 points," said Bradley. "I could see a point going to both Goodyear (GT: Research, Estimates) and Michelin. But this could also raise investor awareness of the risk of liability lawsuits for both those companies, so I wouldn't rush out and buy any tire stocks right now."
Trading on the Tokyo Stock Exchange, shares of Bridgestone ended Wednesday day down 8.2 percent, or 185 yen, at 2,075 yen, extending losses from Monday after Friday's statement that Sears had stopped selling the problem tires. Bridgestone shares are down about 15 percent from last Friday's Japan close.
Shares dropped another 10 percent early Thursday to 1,859 yen, their lowest level in a year.
Firestone may buy competitors' tires
Crigger admitted that Firestone does not have enough inventory on hand to replace the recalled tires, and may have to purchase tires from competitors to satisfy customers.
Due to lack of inventory, the company is concentrating the recall in four hot-weather states - California, Arizona, Florida and Texas, where most of the accidents have been reported. That phase of the recall is likely to last until October, according to Crigger.
Next will come other southern states, to be followed by a national recall. The company said it will replace tires of concerned customers elsewhere in the country, using competitors' tires when necessary. Customers who have already replaced the tires themselves will be reimbursed for the expense.
"Some people will have to wait," said Crigger. "But we will satisfy our customers." (293KB WAV) (293KB AIFF)
Firestone and Ford officials tried to portray the recall as voluntary but over the last week the company has come under increased pressure to respond as the number of complaints continued to rise.
"We felt we must take this extraordinary step as a precaution to ensure consumer safety and consumer confidence in our brands," Crigger said. "So, no matter how many tires, no matter how many miles they have on them, we will replace them with new tires."
Crigger and other officials also said they believe many of the accidents occurred when tires were not properly inflated or maintained or repaired using plugs. He said customers who keep tires properly inflated should significantly reduce any chance of tire failure.
"We are not blaming the customers," said Crigger. "But tires are not indestructible."
Scrutiny from regulators, lawsuits ahead
NHTSA officials said Wednesday that the agency continues to investigate the accidents that have been linked to the tire failure, and that Bridgestone has been cooperating with the agency.
"I am pleased that Firestone has taken a positive step towards resolving this safety issue," said Rosalyn Millman, deputy administrator of the agency. "We will continue with our investigation to assure that the scope of the recall is complete and will adequately address all safety issues related to these tires."
An auto safety advocate charged the recall should have occurred years ago.
"The 46 deaths that have been reported are only those that are known publicly," said a statement from Joan Claybrook, the NHTSA administrator in the Carter administration and president of Public Citizen, the group started by Ralph Nader. "It's likely that there are many others that have not been attributed to the tires.
"The shame of this situation is that both Ford and Bridgestone/Firestone have known about this problem for eight years," Claybrook charged. "The companies have settled a number of lawsuits under gag orders, which prohibited the lawyers or victims in the cases from talking about them. As a result, safety officials and the public have been kept in the dark."
Officials from the companies denied they kept any safety officials in the dark, and said all information about the crashes have been turned over to authorities.
In addition to regulatory oversight, the company still faces the risk of litigation. A family injured last week when a tire blew apart on their sport/utility vehicle in Florida announced a lawsuit Monday against the tire maker.
Randall Smithwick, his wife, their 14-year-old twin daughters and a family friend were driving Thursday across the Everglades on a portion of Interstate 75 known as Alligator Alley when the vehicle's right rear tire blew apart. The Ford Explorer flipped three times before coming to rest on a grassy median. All were hurt.
The Florida Highway Patrol said the right rear tire tread separated, causing the vehicle to swerve. Authorities said the tires were the vehicle's original Firestone Wilderness ATs, as supplied by Ford Motor Co. NTHSA said it would add that accident to the list it is investigating.
A lawyer for the family has said that Firestone and Ford knew the tires were faulty when they began replacing them in South American countries as long as six years ago, but that the companies never alerted U.S. consumers to the dangers.
Ford has replaced Firestone tires free on vehicles sold in Venezuela, Ecuador, Thailand, Malaysia, Colombia and Saudi Arabia after tires failed in those countries. Though not accepting blame, Ford said last week it swapped tires "as a customer satisfaction issue."
It has not made a decision on replacing tires for U.S. customers, but Ford Vice President Martin Inglis told Reuters Tuesday that warranties on the tires in question are covered by the supplier, not the automaker.
Firestone said it is offering free tire inspections in the U.S. in light of safety concerns and will remedy any problems to "the customer's satisfaction."