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Personal Finance
Ford recalls 13 million tires
May 22, 2001: 6:52 p.m. ET

Automaker says Firestone Wilderness tires not in earlier recall pose a risk
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Ford Motor Co. confirmed Tuesday afternoon that it is replacing up to 13 million Firestone-brand tires on its vehicles, doubling the number of tires exchanged in last year's recall.

Officials with the world's No. 2 automaker said that they are taking the step because data analysis shows the Firestone Wilderness tires not included in last year's recall are more likely to fail than other tires on the road.

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graphicWatch Ford CEO Jacques Nasser detail Firestone tire recall.
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The company said the cost of the recall will result in an after-tax charge of $2.1 billion, equal to $1.10 a share, in the second quarter. The company also said the replacement program will cause it to halt a share repurchase program, which it said will reduce earnings per share by another 10 cents.

The company said it is now looking at a second-quarter loss of 35 cents a share, and full-year earnings of $1.25 to $1.35 a share. Analysts surveyed by earnings tracker First Call were looking for second-quarter earnings per share of 82 cents and full-year EPS of $2.60.

Shares of Ford (F: Research, Estimates) lost 67 cents to close at $25.98 Tuesday ahead of the press conference, although the reports about the replacement plan were widespread during the day. Shares of Bridgestone Corp., parent of U.S. tiremaker Bridgestone/Firestone Inc., lost ¥131, or 9.4 percent, to close at ¥1,268 Tuesday.

Moody's Investors Service cut Ford's outlook to "negative" from "stable," citing the recall's potentially negative impact on Ford's fundamental competitive position in the U.S. light-truck and sport/utility vehicle market.

The recall affects all Firestone Wilderness AT tires on Ford vehicles, including many of the tires put on Ford vehicles as part of last year's recall.

Bridgestone/Firestone executives were informed of Ford's plans on Monday. The troubled tiremaker responded by announcing it would no longer sell tires to Ford in the future, although it said it would complete existing contracts. Ford said that decision stopped them from asking the tiremaker to join with it in the recall.

  graphic FORD-FIRESTONE DISPUTE  
    One of the nation's oldest business relations was shattered this week when Ford announced it would replace up to 13 million additional Firestone tires on its vehicles and Firestone said it would no longer enter sales contracts with the world's No. 2 automaker.
  • Special Report: Firestone-Ford recall
  • How tire recall affects consumers, investors
  • Bridgestone sees lost sales
  • Firestone will no longer sell to Ford
  • CNNfn video: Ford-Firestone century-long history
  • Market snapshot: A look at auto stocks
  •    
    John Lampe, Bridgestone/Firestone's CEO, said his company made its move because it believes Ford is ignoring safety problems inherent in the design of the Ford Explorer, the company's best-selling sport/utility vehicle, and that Ford was trying to shift attention from those safety problems by unfairly blaming Firestone for its problems.

    Jacques Nasser, Ford's CEO, said its analysis does show the tires involved in the new replacement program are better and safer than the tires recalled last year. But he said that the data also shows the tires have a higher failure rate as they have greater use. This was determined by both claims information, and testing in the laboratory, Nasser said.

    "Some of these tires were sending us early warnings about future problems," he said. "On behalf of our customers we will not ignore these early warning systems. We simply do not have enough confidence in the future performance of these tires keeping our customers safe."

    "Our tires are safe," said Lampe in a statement Tuesday evening. "When we have a problem, we admit it and we fix it. We've proven that."

    "The real issue here is the safety of the Explorer," Lampe continued. "Ford refused to look at issues surrounding the Explorer in August. Ford failed to do that today."

    Ford said it will replace not only 15-inch, but 16- and 17-inch Wilderness AT tires. Older tires will be given a priority for replacement over the younger tires, which Ford executives said do not have as great a risk.

      graphic FORD'S TIRE REPLACEMENT PROGRAM  
        Ford to replace all 15", 16" and 17" Firestone Wilderness AT tires. Most of tires found on Ford Explorer, and more than 80% tires found on Explorer, Expedition, Ranger and F-150 pick up models.
  • Factory tires replaced at Ford or Lincoln dealer free of charge
  • Ford to reimburse customers who bought tires from authorized retailer
  • Ford will pay max of $110 per 15" and 16" tire, $130 per 17" tire
  • List of replacement tires available at www.ford.com
  •    
    Prompted by data analysis by Ford, Firestone agreed last August to recall 6.5 million tires used primarily on Ford light trucks such as the Explorer and Ranger pickup. The National Highway Traffic Safety Administration has identified more than 100 deaths involving vehicles that rolled over after the tread separated on one of the tires models identified by the recall.

    John Rintamaki, group vice president of Ford, said that the company had a report of "less than 10" additional claims caused by failures of the tires involved in the new replacement program.

    "Obviously any number is not good," Rintamaki said.

    The tires recalled last year included all of the 15-inch ATX tires as well as the 15-inch Wilderness AT tires made at Bridgestone/Firestone's Decatur, Ill., plant. But despite pushing from some safety advocates and trial lawyers, the two companies did not expand the recall to include all Wilderness tires.

    Ford stuck by Firestone initially, saying it would be counter-productive to expand the recall to other Firestone tires at a time they were scrambling to find the replacements for the recalled tires.

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    Jacques Nasser
    CEO of Ford says that the company now believes additional Firestone models pose a risk to Ford customers.
    But Tuesday Ford officials said their data now show the Wilderness tires not included in the recall saw a greater rate of tire failures than tires produced by other tire makers.

    Ford will turn to other tire makers to provide the replacement tires this time. It will also shut down some of its production once again in order to free up tires to be used in the recall. Specifically, it will close plants in Twin Cities, Minn., and Edison, N.J., for two weeks each, and will halt production of its Explorer Sport, Explorer Sport Trac and 2002 Explorer production at the Louisville, Ky., assembly plant for one week.

    If Ford's program announced Tuesday is combined with last year's recall, it constitutes the largest tire recall in U.S. history. The 1978 recall of 14.5 million Firestone tires nearly put the company into bankruptcy and eventually led to the purchase of the tiremaker by Bridgestone Corp. in 1990.

    The cost of last year's recall was shared by Ford and Firestone and topped $1 billion.

    Ford executives defended the company's Explorer from Firestone's charges the vehicle's design was responsible for the safety problems. It said that there have been only two cases of tread separation on Explorers using Goodyear tires.

    "Obviously the tire is a major factor," said Rintamaki.

    Firestone issued a statement late Tuesday saying it was never asked by Ford to join in a recall or replacement program.

    "We want to set the record straight," said the statement from Christine Karbowiak, Bridgestone/Firestone vice president of public affairs. "At no time during yesterday's meeting between Ford and Bridgestone/Firestone, did any representative from Ford ask us to recall tires or replace any tires.  They did not ask us to join with them on a recall or a replacement program.  They told us they had made absolutely NO decision concerning our tires on their vehicles.  Comments by Ford to the contrary are inaccurate."

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    William Clay Ford, Jr., great-grandson of the founders of both Ford and Firestone.
    Ford was not looking at cutting off Firestone as a supplier before the company's decision to sever ties with Ford, said William Clay Ford Jr., Ford's chairman and the great-grandson of both Ford founder Henry Ford and Firestone founder Harvey Firestone.

    "This action was really aimed at the Wilderness AT," said Ford. "We didn't aim to take any draconian action. But they took the step they did."

    Ford expressed personal regret over the rupture of the relationship between the two companies in his family's background.

    "This decision is a painful one for me personally," he said. "I grew up with Firestone as part of my family. To see this all taking place is deeply disturbing. But the reality is Firestone was sold many years ago to Bridgestone, and my family involvement ended at that point." graphic

      RELATED STORIES

    How Ford/Firestone tire recall affects consumers and investors - May 22, 2001

    Firestone says it won't sell to Ford - May 21, 2001

    Report says Ford eyeing new tire recall - May 18, 2001

    Consumer groups blame Ford for poor tire design - Apr. 25, 2001

    Ford profits drop but drive past estimates - Apr. 19, 2001

    Special Report: Ford-Firestone recall

      RELATED SITES

    Bridgestone faces hefty cost in tire spat - May 22, 2001

    Ford Motor Co.

    Bridgestone/Firestone

    National Highway Traffic Safety Administration


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