Firestone's Second Big Tire BlowoutPublished: August 30, 2000 in Knowledge@Wharton
This isn’t the first time that Firestone tires have been subject to a massive recall. Nor is it the first time that the company has had to face a firestorm of public criticism.
On Oct. 20, 1978, Firestone recalled 10 million of its steel-belted radial 500 tires. Richard A. Riley, chairman of what was then known as Firestone Tire and Rubber Co., said at the time that the company agreed to a recall not because the tires were defective but because of publicity. "The thought that there is a defect has been implanted so strongly that we have to convince our customers that we are interested in their welfare," Riley said. "So I think the best solution is to get this behind us."
In light of what happened years ago, Wharton ethics professor
"Because Firestone had previously been harmed by a high-visibility case involving safety issues with one of its products, you’d think that they’d have well-established risk management policies that would prepare them to be quick and upfront on something like this," Dunfee says. "They had an enormous black eye in the 1970s due to a failure to act quickly and decisively."
Firestone’s steel-belted radial 500 tire was the subject of ongoing controversy throughout much of the 1970s, according to a detailed case study published by Harvard Business School in 1983 -- a case that has been taught to students in Wharton’s ethics classes over the years.
To get the 500 into production before competitors, Firestone "used modified bias-belted tire production equipment to manufacture its SBR tires," according to the case study. "The switch-over saved time and money but turned out to be trouble-ridden. As company documents show, the Firestone 500 tire posed problems throughout its production life. A 1972 memo from a Firestone quality control manager warned of an ‘adhesion problem’ and reported a test tire in which ‘the rubber peeled cleanly from the wire.’"
It was believed the problem was solved "until another executive wrote in late 1972 about the ‘danger of being cut off by Chevrolet (a division of General Motors) because of belt separation failures,’" according to the case study. At one point, in 1977, Firestone recalled 400,000 tires after it determined that some 25,000 tires produced at its Decatur, Ill., plant, were defective. The recall was voluntary but it followed arm twisting by the government. (Coincidentally, it was the Decatur plant that produced most of the problem tires in the current recall, according to an analysis by Ford.)
GM and others continued to complain about belt-separation over the next few years. In 1978 public concern about the safety of Firestone tires was still running high. But concern turned to anger when the Akron Beacon Journal ran a story on July 23, 1978, about an internal Firestone report from 1975. That report said some Firestone steel-belted radials made for GM vehicles had failed a government high-speed test.
Over the next few years, Firestone continued to tangle with federal regulators and customers, the case study explains. In March 1978, the National Highway Transportation Safety Administration (NHTSA) announced a formal investigation into Firestone 500 defects. Firestone balked at cooperating. In April 1978, things got worse for the company and relations with regulators grew increasingly contentious.
On Aug. 8, 1978, Firestone appeared before the NHTSA and argued that its steel-belted radial 500 was safe, despite what the public may have thought. The next day, though, Firestone indicated a willingness to resolve the dispute. Meanwhile, civil and class-action suits were pouring in, and the NHTSA threatened to order a recall. In October, Firestone’s chairman finally announced the big recall.
"Firestone was slow to recall the tires and was resistant to information from a lot of sources [that claimed there were problems with the product]," says Dunfee. "This was a classic case in business ethics, and to have it happen a second time is hard to believe."
Schmittlein says one lesson that Bridgestone/Firestone apparently has not learned from the 1970s is that to defend a product in the clinical terms of a product engineer, while ignoring the larger issue of public safety, may leave customers cold and bitter.
"Whether there was, in fact, anything wrong with the tires isn’t the issue at this point because Bridgestone/Firestone has gone ahead with the recall," Schmittlein says. "At this point what a firm needs to do is move to an effective recall that addresses likely consumer concerns and comes across as signaling the commitment of the firm’s management to the integrity of the particular product.
"The cornerstone of an effective handling of a crisis like this would include, first, a plan that is clearly thought through, is clearly implementable, is easy to understand, and addresses the issue from the consumer’s standpoint. If you look over this list, there are reasons to question what Bridgestone/Firestone has done so far."
For one thing, Schmittlein says, initially limiting the recall to selected states where climate and road conditions were believed to be more conducive to tire failure was a mistake. "This is the kind of thing a firm cannot afford in situations like this," Schmittlein notes. "Even if there is a bit of a delay in putting in place a plan, it needs to be perceived as complete to reestablish the brand in the minds of consumers."
In addition, Schmittlein pointed to a remark by a Firestone executive as an example of how not to engage in crisis management. Bob Wyant, Bridgestone/Firestone’s vice president of quality assurance, was quoted in news reports as saying, "We’ve got such a high volume of tires that looking for the root cause is like looking for a needle in a haystack."
Such a comment sounds like self-pity and is company-directed, Schmittlein says, as opposed to being outward-looking and addressing customers’ fears. "If you’re looking at the best way to interpret that, I can’t see it," Schmittlein says.
Dunfee and Schmittlein expressed some disagreement as to how customers will perceive Ford’s role in the crisis. "To the extent that the recall is associated with Ford products, the public is not likely to carefully sort out who’s responsible between Ford and Firestone," Dunfee says.
Schmittlein, who has served as a marketing consultant to many corporations, says Ford has had the easier task in dealing with the recall, since it did not actually make any defective tires. Nonetheless, he says, Ford officials have handled their roles in the crisis much more effectively than those at Bridgestone/Firestone. "They’ve been getting out in front of the issue, articulating what they know. They’ve been the leader in disclosure here. I see no evidence of Ford knowing something and sweeping the problem under the rug."
Looking ahead, Schmittlein says Bridgestone/Firestone has a major decision to make: whether to spend time and money rebuilding the Firestone brand. "At one time, Firestone wasn’t doing so well, which is why it was bought by Bridgestone," Schmittlein says. "Firestone is what is known as a ‘legacy brand,’ a brand that is attached to a particular product after a company is taken over. The health of these kinds of brands tends to be a bit unstable. When a brand is not a flagship, there is sometimes less commitment to restoring that brand. Firestone is not the brand that built Bridgestone/Firestone. It’s not like Ivory Soap and Procter & Gamble. There’s little emotional attachment to the Firestone brand."
What would happen, Schmittlein asks, if Bridgestone/Firestone, which makes several different brands of tires, were to let the Firestone brand "wither on the vine?" One possibility is that Bridgestone/Firestone could cut costs and increase profits by eliminating the need to sustain what is, in fact, a competitor. "If that were the case, it wouldn’t be the first time," Schmittlein says. "There are plenty of instances where a firm buys a brand from another firm and drops the brand to take out a competitive entity."