Personal Finance
Firestone dumps Ford
May 21, 2001: 7:27 p.m. ET

Ford reportedly to recall additional 10-13 million Firestone tires
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Hours after Bridgestone/Firestone said it will no longer sell tires to Ford Motor Co., the company whose vehicles were most affected by a recall of Firestone tires last year, a report surfaced that Ford intends to recall another 10 million to 13 million Firestone tires.

Bridgestone/Firestone issued a statement Monday saying it no longer had trust in its relationship with Ford, which pressed for last year's tire recall.

Late Monday, citing auto industry sources, the Associated Press reported news of the further recall, which is far greater than the 6.5 million tires already recalled last summer.

Ford CEO Jacques Nasser said the company will have an announcement Tuesday relating to Firestone Wilderness AT tires, the type used on its popular Explorer sport/utility vehicles. Without confirming another recall, he said he plans to tell lawmakers in Washington about the company's findings Tuesday.

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graphicJohn Lampe, CEO of Bridgestone/ Firestone, explains the end of its business relationship with Ford. (Courtesy: WZTV)
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Ford has insisted that problems with Firestone's tire design and manufacturing caused more than 100 deaths linked to the tire failures.

Shares of Bridgestone's shares closed down ¥36 to ¥1,399, about 2.5 percent, in Tokyo trading Monday, while shares of Ford (F: Research, Estimates) dropped 48 cents to $26.65.

Bridgestone/Firestone acknowledges there were design and manufacturing problems on its end, but says the design of the Ford Explorer contributed to the deaths. It released data Monday showing the Explorer has five-to-10 times as many tire failure claims as Ford Ranger pick-up trucks with the same tires.

Firestone's statement said Ford's refusal to acknowledge its responsibility was the reason for terminating the business relationship. It said it would fulfill existing contracts but enter into no new supply agreements as of Monday.

"Our analysis suggests that there are significant safety issues with a substantial segment of Ford Explorers," said a letter from John Lampe, the CEO of Bridgestone Corp.'s U.S. subsidiary, to Nasser. "We have made your staff aware of our concerns. They have steadfastly refused to acknowledge those issues.

"We believe you are attempting to divert scrutiny of your vehicle by casting doubt on the quality of Firestone tires," Lampe's letter continued. "These tires are safe, and as we have said before, when we have a problem, we will acknowledge that problem and fix it. We expect you to do the same."

In reply, Ford issued a statement saying that Firestone's announcement followed presentation of Ford's latest analysis of the safety of Firestone's Wilderness AT tires, some of which were involved in last year's recall. Many safety advocates have pushed for Firestone to expand its recall of those brand of tires and according to published reports last week, Ford officials were weighing whether to push Firestone to expand the recall of tires as well.

"We are deeply disappointed that upon hearing and seeing this analysis of Firestone Wilderness AT tires, Firestone decided not to work together for the safety of our shared customers, which is the only issue that matters," said the statement.

Nasser will present the findings of its latest analysis to Congress Tuesday, reportedly along with the details of the expanded recall.

Lampe told Lou Dobbs Moneyline Bridgestone/Firestone has not heard "or had anything confirmed" that Ford has made a decision on a further recall.

As to the safety of the Explorer, Ford's statement said that the best-selling sport/utility vehicle has a safety record at or near the top of the 12 SUVs in its class, and that Explorers equipped with tires made by Firestone competitor Goodyear have an industry-leading safety record.

John Lampe
Bridgestone/Firestone CEO speaks at a press conference Monday announcing the company would no longer sell tires to Ford Motor Co.
Ford agreed to split the cost of last year's recall with Firestone. But it has steadfastly refused to acknowledge its vehicle design was at fault in the accidents.

At a press conference Monday afternoon, Lampe said that direct sales to Ford accounted for less than 5 percent of the company's total revenue, although he did not specify if that was 5 percent of Bridgestone/Firestone Inc., the company's U.S. operating unit, or the global sales of Bridgestone Corp.

"We will continue to grow our business with other customers who have been very, very loyal and very supportive," he said.

Lampe's statements contained the most direct accusations against Ford by the tiremaker.

"We believe there are substantial safety concerns with large segments of the Ford Explorer market," he said. "Most of the deaths and injuries involve Ford Explorers, not other vehicles equipped with the same tires. So the question must be asked, why does this seem to be happening only on Ford Explorers?"

Analysts said Monday's split was likely bad news for both companies, though they said they believe that Ford stands to lose less than Firestone from the move.

"It's obviously going to hurt Firestone financially," said Wendy Needham, analyst with Credit Suisse First Boston. "They're giving up business that will be tough to make up elsewhere. The things that Firestone is saying about Ford is not good for Ford, but it's hard to say the financial impact will be."

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Needham and other analysts believe the Firestone announcement was a pre-emptive move aimed at helping it repair its reputation. But they said that Firestone's reputation with consumers has yet to recover from last summer's recall.

"Obviously they're trying to repair that reputation," Needham said. "But since their reputation has been so damaged in the aftermarket, it's unlikely they are going to fill the lost orders with replacement tire sales."

Another analyst said that continuing focus on safety and quality problems are one of the factors dogging the launch of the newly-designed 2002 Explorer, which has been on the market since March.

"It's the worst thing that can happen if you're trying to launch a new product," said Rod Lache, analyst with Deutsche Banc Alex. Brown, who described the sales of the 2002 Explorer as disappointing to date.

He said Firestone retail sales to consumers are still off 20-to-30 percent from year-ago levels, as consumers are apparently wary of even the tire models not covered by the recall. While most tires are sold directly to automakers rather than to consumers, retail sales are key to the company's bottom line.

"Generally the replacement tire market drives all the profitability for a tire maker," he said. "As a general rule, no one is making money in the original equipment market."

Monday's announcement comes in the wake of a recall of 50,000 new Ford Explorers due to a tire damage problem caused by its assembly line in Louisville, Ky. Ford officials said all the tires on the affected vehicles were either Goodyear or Michelin brand tires. A Ford spokesman said the damage was cosmetic in nature and that there had been no reports of accidents or injury caused by the tire damage.

The National Highway Traffic Safety Administration is still conducting its own investigation into the last year's tire failure problems involving the recalled Firestone tires. graphic

-- Staff Writer Kim Khan contributed to this report