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News > Companies
Firestone, Ford face charges, labor pains
August 31, 2000: 9:45 p.m. ET

Nasser to testify; Venezuela hints at criminality; Firestone union vows strike
By Staff Writers Chris Isidore and John Chartier
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NEW YORK (CNNfn) - Ford Motor Co.'s Chief Executive Officer Jac Nasser Thursday angrily denied that the company lied to the Venezuelan government about problems with Firestone tires as officials in the United States widened their investigation to include 26 more deaths.

Capping a day of rapid developments in the Firestone crisis, Nasser also said he will testify at Congressional hearings on the recall in Washington next week, reversing a previous decision to remain at Ford's headquarters to supervise the recall.

Earlier, Venezuela's consumer protection chief recommended that criminal charges be filed against the automaker and Bridgestone/Firestone Inc., alleging design problems on both tires and sport/utility vehicles that contributed to 46 deaths in the South American nation. [WAV 409KB] [AIFF 409KB]

graphicSeparately, Firestone workers in the United States threatened to strike this weekend unless they get a new contract, a move which could cripple the company's efforts to produce replacement tires.

Further complicating matters, the National Highway Traffic Safety Administration increased the number of deaths it is investigating that may be due to Firestone tires to 88 from 62.

Authorities began investigating the tires in August after receiving reports that the rubber peeled off the tire casings on some versions of the Firestone ATX, ATX II and Wilderness tires. The tires are used on a number of sport-utility vehicles, but most of the complaints have focused on the Ford Explorer.

"Because I don't want any question about our objective to make as much as we have public, and all the actions we have taken public, I've decided personally to testify at the Congressional hearings next week," Nasser told reporters during an afternoon press conference. "When it was a question of data and technical knowledge, I felt our technology experts were adequate, but it's a broader issue now and I will be happy to do that."

Ken Johnson, a spokesman for Rep. Billy Tauzin, R-La., chairman of the House Commerce Committee, which is holding the hearings at 1 p.m. Wednesday, said he was pleased that Nasser changed his mind and decided to testify.

"It's a huge development. We don't care why he changed his mind; we're just glad that he did," Johnson said. "Mr. Nasser's appearance hopefully will help us in getting to the bottom of this controversy. The whole point of this exercise is to find who knew what and when, and what can we do about it."

'We did not lie'


Addressing a report by government officials in Venezuela alleging both Ford and Firestone should face criminal charges for not acting sooner on reports of failing tires two years ago, Nasser said "we did not lie to the Venezuelan government" in turning over all accident and tire defect information as soon as it became available.

"We did not hide anything, and we actively looked to see if there was any evidence in the U.S. market in every case we were ahead of Firestone in replacing tires," Nasser said. "We did it on our own when the data supported the action."

Ford has replaced about 1.5 million tires so far, Nasser said.

Indecu President Samuel Ruh Rio said the two companies had a "shared responsibility" in producing a "fatal combination" for Venezuelan drivers. He said the agency would not take any legal action against the companies, but he urged the public prosecutor to file criminal charges.

graphicHe said the recall of tires in Venezuela made by Ford should be expanded to tires other than the specific 15-inch models included in the U.S. recall. He also called for Ford to reinforce, free of charge, the suspension on all of the roughly 30,000 Explorer sports/utility vehicles sold in Venezuela since 1996.

The soft suspension and weaker tires make the vehicles "undriveable," Rio said, adding that Venezuelan investigators have written proof to back up their allegations.

In a sign of the widening rift between longtime partners Ford and Firestone, Nasser said Ford acted before Firestone to replace tires on Ford vehicles in Venezuela, after it apparently unsuccessfully asked Firestone to look into media reports about defective tires two years ago.

A PR 'nightmare' for Ford


The tire recall has been nothing short of a public relations nightmare for Ford and Nasser, who on Thursday seemed intent to distance the automaker from Firestone's plight. Projecting an image of caring for its loyal customers and pride in the popular Explorer SUV, Ford has run television and print ads - starring Nasser alone - revealing Ford's diligence toward resolving the crisis.

At Thursday's press conference, Nasser appeared without his suit jacket, giving a forceful defense of his company's efforts thus far and explaining his plans to testify before federal lawmakers. Experts say his public behavior could be crucial if Ford is to avoid being labeled as a company that is slow to address serious safety concerns.

"It sounds like the 'handlers' have gotten to him," said Tom Preston, founder of Preston Global, a crisis-management firm in Versailles, Ky. "They are saying (to Nasser), 'You have got to become more of the people, you have to develop a different image which has nothing to do with (Ford's) reputation.'"

Preston noted that while not every potential crisis can be anticipated by a large company, one would expect that a critical item such as tires ought to have been a major concentration for a car company, especially one which relies on another firm to provide the product.

"Good crisis management begins with vulnerability assessment and crisis prevention," he added. "It's much cheaper to go that route than it is to try to recover. The hollow sounds of after-the-fact apologies and promises, don't penetrate the anger of consumers."

"What (Nasser) has to do now is direct every type of resource available - including - monetary, human and intelligence -- toward the resolution of this crisis as quickly as possible," Preston said.

Firestone continues working with Ford


In a separate press conference, Bridgestone/Firestone said it had just received a copy of the report from Venezuela's consumer protection agency, Indecu, and needed time to study it.

"We take this matter very seriously and realize time is of the essence," Bridgestone/Firestone spokeswoman Christine Karbowiak said.

John Lampe, Bridgestone/Firestone's executive vice president said the company is continuing to work closely with Ford, but that the automaker, which has been steadily trying to distance itself from its long-time partner, is continuing to use Firestone tires on its vehicles.

The world's second-largest tire maker also faces a potentially crippling strike that could choke off its efforts to replace 6.5 million tires, primarily on Ford vehicles, that have been recalled in the United States.

Workers at nine of the company's U.S. plants vow to walk off the job at 12:01 a.m. Saturday without an agreement. Some of the members of the United Steelworker union (USW) held a midday rally Thursday outside Bridgestone/Firestone's Nashville, Tenn., headquarters, as a way of turning up the pressure on the company, which is owned by Bridgestone Corp. of Japan.

Other problems mount at home as well


Also, as federal investigators probe how long ago Firestone and Ford knew of problems with the tires, a spokesman for State Farm Mutual Insurance said Thursday that Firestone acknowledged problems with at least some of the recalled tires as far back as 1997 because it made payments to State Farm to reimburse it for accident claims.




Firestone: lawyers delight

Get on right track with tires

Firestone recall timeline

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Dave Hurst, spokesman for the company that insures almost one of every five passenger vehicles on the road in the United States, did not know the total amount of the reimbursement, nor could he say how many accidents were involved. He said the reimbursements covered only tires included in the Aug. 9 recall.

"When we have evidence of problems, we seek these ... payments," Hurst said. "Sometimes the manufacturers agree, sometimes they resist, and we try to negotiate with them. When they pay, they're conceding we have a good case."

Demand for tires gives union leverage


The strike threat comes just as Bridgestone/Firestone and its Bridgestone parent are doing everything they can to come up with replacement tires. The company has even been forced to turn to competitors to help replace the tires and to charter Boeing 747 freighters to airlift increased production from its Japanese plants.

graphicFirestone and Ford also face a congressional hearing next Wednesday into the tire problems.

This is probably a good time for the union to be applying pressure to the company, despite the fact that some analysts question the long-term viability of the Firestone brand due to the publicity surrounding the recall, according to Thomas Hyclak, professor of economics at Lehigh University and an expert on labor relations.

"There's a dilemma there," he said. "Clearly in a situation where a company is having trouble supplying customers is particularly ideal time for the union to be threatening to strike. However, in the current situation, you've got an external event threatening the future of company as a whole.

"My guess is the company is going to be more conciliatory," he said. "A strike would be devastating to the Firestone's image and efforts to fulfill their promises. My guess is the union should come out ahead in these negotiations."

Most U.S. production at risk


The steelworkers' union represents 8,000 Firestone employees at nine U.S. plants who are threatening to strike. The company also has two other non-union tire plants in the United States and tire plants in Mexico, Canada and South America not affected by the possible strike. Still, the U.S. tire plants facing a strike make most of the Firestone tires in North America.

The union officials said they are willing to work with the company to increase production for the recall, but they want improvements in working conditions, including reduction in forced overtime, pension improvements and more respect for workers by managers.

"I don't think the company's in the driver's seat here or surely they don't want a work stoppage at this time, and we want to work with them through this problem," said Larry Odum of USW Local 1055.

Labor relations have been particularly bitter at the tire maker. The current contract was not reached until more than a year after the end of an earlier strike that brought about a merger of the United Rubber Workers union into the USW, as well an unsuccessful attempt by President Clinton to ban federal purchases from companies that hired permanent replacement workers to take the jobs of strikers.

Replacement workers may have made recalled tires


The affected plants include the Decatur, Ill., plant, which produced many of 6.5 million tires involved in the company's recent U.S. recall. There have been charges that many of the tires suffering from tread separation problems were produced by replacement workers during the last strike. Many union employees at the plant have given testimony in lawsuits against Firestone alleging quality control problems at the plant.

A union official said the two sides are still far apart on many issues, including mandatory overtime, pensions, insurance and seniority rights.

"They're in the midst of round-the-clock negotiations, and making some limited progress, but not enough," said Scott Smith, an official at USW Local 1055 that represents a plant in suburban Nashville. "It's basically up to the company at this point. We're going out if we don't have a fair agreement."

Still, Firestone's Karbowiak, said the company still is hopeful an agreement can be reached without a strike. "As we have said all along, one of our top priorities along with assuring customer safety is achieving a fair and reasonable agreement," Karbowiak said. "The talks are constructive, and we are hopeful we will reach a new agreement before the deadline. We respect the collective bargaining process and believe the issues should be settled on the table. A strike will benefit no one and we are working very hard to avoid a disruption."

Karbowiak acknowledged the company was taking measures to prepare for a strike, but would not provide details, saying she remained confident of meeting the Saturday deadline.

USW's Smith said that the union and members were not worried about the company turning to replacement workers again in case of a strike.

"That bird has come home to roost, hasn't it?" he said, referring to the tire recall. He said unemployment in the Nashville region is now below 3 percent, much lower than when the previous strike started in 1994, and he doesn't believe the company could find replacements for the 1,320 union workers at the plant.

Hyclak agreed that this would be a very difficult time for Firestone to use replacement workers, given the publicity about tire quality and the tight labor market.

graphic"For a credible strategy to use replacement workers, you have to suppose you'll be on strike for a very long strike, because it takes so long to recruit new employees in this labor market," he said. "And if they tried using replacement workers, the union would be out there hammering them, saying, 'The last time they did this, the tires blew-up.'"

The union has continued to work without a contract for several months, but set the new deadline two weeks ago. By waiting, it hopes to get all nine plants on contracts with a common expiration date.

Shares of Japanese-based Bridgestone fell nearly 7 percent to a new five-year low in Tokyo trading Thursday, dropping 98 yen, or 92 cents, to 1,380 yen, or $12.97. Shares of Ford (F: Research, Estimates) fell $1.62 to close at $24.25 Thursday.

-- Staff Writer Franklin Paul contributed to this report.

-- Click here to send e-mail to Chris Isidore  Back to top

-- Click here to send e-mail to John Chartier

  RELATED STORIES

Firestone: lawyers delight - Aug. 30, 2000

Tire woes hitting Ford - Aug. 30, 2000

Get on right track with tires - Aug. 30, 2000

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Replacement workers role in problem tires alleged - Aug. 14, 2000

Firestone recalls 6.5 million S/UV tires - Aug. 9, 2000

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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.