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News > Companies
Tire woes hitting Ford
August 30, 2000: 6:44 p.m. ET

Automaker beleaguered by Venezuelan officials, analysts, new recall threat
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NEW YORK (CNNfn) - After winning the public relations effort to distance itself from defective Firestone tires on many of its vehicles, Ford Motor Co. is being hit with a series of legal and image problems.

The head of Venezuela's consumer protection agency Indecu said on Wednesday that both Firestone parent Bridgestone and Ford are to blame for faulty tires linked to around 100 accidents in the South American country, despite Ford's efforts to pin all the responsibility on the tire maker. Indecu is expected to release a report Thursday that could open the door to criminal charges against the two companies there.

U.S. highway safety regulators also pressed Ford officials for information about the recall of tires overseas, trying to determine why Ford customers in countries such as Saudi Arabia and Venezuela got new tires before U.S. customers were notified of problems.

In an unrelated recall issue, Ford was hit with a preliminary court decision in California that could lead to a recall of as many as 2 million vehicles due to stalling problems. The ruling comes as part of a lawsuit filed on behalf of 3.5 million California owners of Ford vehicles sold from 1983 to 1995.

And after leading the public relations efforts dealing with the recall, including appearing on a series of television commercials, Ford says that Jac Nasser, its chief executive, will not appear at a congressional hearing into the recall next week, prompting some criticism. But a spokesman for the congressman chairing the hearing Wednesday backed away from earlier threats to subpoena Nasser to appear.




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Ford also suffered its first analyst downgrade since the recall of 6.5 million Firestone tires primarily used on its vehicles was announced Aug. 9. David Garrity, analyst with Dresdner Kleinwort Benson, told CNNfn's Ahead of the Curve program Wednesday that he thinks company attention will be distracted from steps it had been taking to improve share price, and that other automakers offer better investment opportunities in the current environment. Garrity on Tuesday downgraded Ford from "buy" to "add."

The National Highway Transportation Safety Administration Wednesday released a six-page letter that it sent to Ford on Tuesday, asking for details of its recall of tires in 16 hot weather nations over the last year. Heat has also been associated with the tire failure in the United States, with most of the 62 fatalities taking place in Texas, Florida, Arizona or California. The nations where the earlier recalls took place were Saudi Arabia, Venezuela, Malaysia, Thailand, Colombia, Ecuador, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Syria, Yemen and the United Arab Emirates.

Garrity said public perceptions of Ford will not be helped by its acknowledgement that it knew of problems with Firestone tires in other countries and yet delayed recalls either there or in the United States.

"We think that on balance, the perceptions are not positive," he said.

Despite the downgrade and public relations hits Wednesday, shares of Ford (F: Research, Estimates) gained 75 cents to $26 in trading Wednesday. Bridgestone shares fell to a new five-year low in trading in Japan, losing 48 yen, or 45 cents, to 1,478 yen, or $13.93.

Garrity said given the rising perception problems surrounding Ford, he believes it is a mistake for Nasser not to appear at the congressional hearing into the recall set for Sept. 6. (499KB WAV) (499KB AIFF).

graphicKen Johnson, spokesman for Rep. Billy Tauzin, R-La., chairman of the House Commerce subcommittee holding the hearings, said the committee would like to hear from Nasser, but will go ahead with whomever Ford sends. Bridgestone Chairman Masatoshi Ono is set to testify for the tire maker.

"We're still hopeful he'll agree to testify," said Johnson Wednesday. "If he declines, we have a very important hearing next week and we'll go ahead without him. Ford has been very cooperative in providing information. They've offered two very high-ranking officials (to testify). We'll see what they have to say. One way or another we'll get to the bottom of this."

Perceptions of Ford have generally been more positive than those of Firestone, according to observers.

"I think it's almost impossible for Ford to distance themselves from the problem, but I think they've done a very good job conveying responsiveness to the U.S. consumer, obviously being more responsive than Firestone has," said Rod Lache, auto analyst for Deutsche Banc Alex. Brown.

Still, the potential legal liabilities involved in the case as well as doubts about the long-term impact on the sale of the Ford Explorer, a key profit generator for the world's No. 2 automaker, makes this a bad time for investing in the stock, Lache said.

graphicA sampling of reader opinion on CNNfn.com Tuesday and Wednesday found that 64 percent of readers did not believe that Firestone was doing everything it could to address the problem with tires, but a plurality of those answering, 48 percent, gave Ford officials credit for doing what they could to address problems.

Still the sampling contained some bad news for Ford: Nearly 70 percent said they would not buy a Ford Explorer, the best selling vehicle most closely associated with the recall, equipped with Firestone tires, even if the tires were not covered by the recall. And 53 percent said they believe the government should broaden the recall.

One person who is not convinced of Ford's efforts to address problems is Samuel Ruh, president of the Venezuelan consumer protection agency Indecu. He told Reuters Wednesday he is not been convinced by arguments from Ford that its Explorer sport utility vehicles were safe and that Bridgestone's Firestone tires made in Venezuela had manufacturing faults.

"Both companies are to blame," he said.

Indecu will present a report to the public prosecutor on Thursday recommending that both companies be held responsible for both material and human damages in accidents in Venezuela, Ruh said.

graphicFord officials said Tuesday it has proposed that Indecu form an independent committee to conduct a technical evaluation of the tires made by Firestone Venezuela and the Explorer made by Ford Venezuela. It said it has shown samples of Firestone tires from Explorers there that clearly indicate tread separation problems.

Ford also denies there is any problem with the ignitions cited in the California civil lawsuit. The suit claims that vehicles stall because an ignition device is in the wrong place on the vehicle.

Susan Krusel, a Ford spokeswoman, said Ford would ask Alameda County Superior Court Judge Michael Ballachey to reverse a preliminary order he entered in the case Tuesday at a hearing now set for Sept. 28. She said Ford attorneys believe the decision would be reversed on appeal if the judge does not reverse the order himself.

"The court's ruling absolutely conflicts with all of the real world data and engineering analysis presented in this case," said a statement from Ford Wednesday. The company said the modules involved in the case lasted on average more than 100,000 miles.

But the plaintiff's attorney said Tuesday's ruling was a huge victory.

"It (Ford) knew it had a massive problem so big it had to do something, but that it would be too costly so they told the government that only a fourth of the vehicles were affected," said attorney Jeffery Fazio on Wednesday.

Consumer advocates estimate that a vehicle recall would cost Ford between $70 million and $250 million, The New York Times reported Wednesday. Back to top

-- from staff and wire reports

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.