The Ford-Firestone Case
1. The Recall
In July 1998, Sam Boyden from State Farm Insurance received a call from a claims adjuster inquiring about Firestone tread separation. Sam began to research this issue and he found that there were 20 more such cases going back to 1992. All 21 cases involved Firestone ATX tires and 14 of them involved the Ford Explorer. He then sent an unsolicited e-mail to the National Highway Traffic Safety Administration (NHTSA) describing the 21 Firestone cases. In return, The NHTSA thanked him but did not follow up on the complaint. Sam Boyden proceeded to track the problem and during 1999 noticed another 30 such cases. He continued passing on the information to the NHTSA. In February 2000, Houston’s KHOU TV station aired a segment on tread separation. The station's report on tire problems prompted several dozen people in Texas to report similar trouble to regulators. Immediately thereafter, the NHTSA began studying the problem of Firestone tires. In May 2000, after accumulating 90 complaints involving four deaths, the agency opened a formal investigation. The investigation encompassed all 47 million AT, ATX and Wilderness tires made by Firestone over the last decade (1990-2000). By the beginning of August 2000, the NHTSA had recorded 68 fatalities in rollovers of Ford Explorer SUVs caused by sudden tread separation of Firestone tires. All except two dozen of the complaints came in year 2000, even though the Explorer had been on sale since 1990 and a handful of lawsuits citing tire failures were filed as early as 1993. By August 16, 2000, the government data included public complaints of 52 deaths in Explorers that rolled over after Firestone tires failed, and five more deaths in Explorers for which the complaints did not mention whether rollovers occurred. By September 19, there were 2,200 complaints involving 103 deaths and more than 400 injuriesiii. On August 9, 2000, Bridgestone-Firestone announced a recall of 6.5 million Firestone Wilderness, AT, ATX and ATX II P235/75R15 tires (15" tires). Firestone Tires included in the recall were installed as original equipment on Ford Explorer (model years 1991-2000), Mercury Mountaineer (model years 1996-2000), Ford Ranger (pick-up truck model years 1991-2000), Ford F-series Light Trucks (model years 1991-1994), Ford Bronco (model years 1991-1994), Mazda Bseries (pick-up truck model years 1994-1996), and Mazda Navajo (model years 1991-1994). Firestone suggested a three-phase recall procedure since Bridgestone-Firestone did not have the production capacity to do it faster. In the first phase, customers in the southern most states (Florida, Texas) would get their tires replaced (most accidents had occurred in these states); the second phase consisted of the states Georgia, North Carolina, etc., and the last phase would deal with the northern most states, e.g., New York. The entire recall process was expected to take This note was written by Professors Michael Pinedo, Sridhar Seshadri, and Eitan Zemel, Department of Information, Operations, and Management Sciences, Leonard N. Stern School of Business, New York University, New York, NY 10012. Copyright October 23, 2000. Revised 9/3/02. To order copies, call (212) 998-0280. No part of this publication may be reproduced without permission.
The Ford-Firestone Case
Professors Pinedo, Seshadri, Zemel
more than 6 months. The Chief Executive Officer (CEO) of Ford, Jacques Nasser, thought that this recall format was too slow and unacceptable. He insisted that customers be allowed to replace their tires with tires from other manufacturers and that they be reimbursed for the costs by Firestone. Firestone agreed. In order to speed up the process, Bridgestone began to fly in tires from Japan and Ford idled one of its Explorer assembly plants for two weeks in order to free up more tires for the recall process. The recall was a major blow to Firestone, which was once one of the most admired...