Bridgestone’s Top Man Resigns, a Victim of Firestone Scandal
Unable to prevent its Firestone tire problems in the United States from lapping up onto Japanese shores, Bridgestone on Thursday announced the resignation of three top executives, including its hard-charging president, Yoichiro Kaizaki.
It was a tacit admission of how badly Kaizaki and his team handled the crisis in its early days.
As reports spread in early August of dozens of deaths--the number would eventually exceed 100--linked to tire separation of Firestone tires on Ford Explorer vehicles, Bridgestone stonewalled the press and public. When it was forced to respond in a congressional hearing, it dispatched an executive who didn’t speak English and looked bewildered and confused by the technical issues.
Ceremonial “head-chopping” in the wake of scandal has a long history in Japanese corporate and political life. At Bridgestone, however, the cuts are deeper and more substantive than form alone would dictate.
Three people--two executive vice presidents on Kaizaki’s team are also out--are being purged rather than the traditional single scapegoat. In addition, Masatoshi Ono, the former chief executive of the company’s Nashville, Tenn.-based Bridgestone/Firestone subsidiary, will depart immediately, without waiting until the end of the fiscal year or keeping a customary and face-saving advisory role.
To drive home the point, Bridgestone departed from the usual practice of filling the top spot with a generalist and instead replaced Kaizaki with the company’s longtime head of quality control, Shigeo Watanabe.
The moves were greeted positively in Japan by experts and laymen alike at a time when a series of scandals in the country’s food, nuclear, and transportation sectors are racking national confidence in its much-vaunted quality control.
“This is a much more decisive approach than usual,” said Junichi Shinohara, a 61-year-old Japanese security guard. “Usually they cut one head, which is a bit like cutting a lizard’s tail off while the body of the problem remains.”
Bridgestone’s sluggish early reaction to the Firestone problem contrasted with Ford’s quick response as feisty President and Chief Executive Jac Nasser came out swinging and the company worked overtime to tell its side of the story.
“There was a six-week period when [Bridgestone] had it’s head in the sand,” said Howard Smith, Tokyo-based auto analyst with ING Barings. “And Ono didn’t even speak the same language,” literally or conceptually.
By the time Kaizaki did speak--dispelling rumors that he had been cowering in a hotel room as the crisis festered--significant damage had been done to the Bridgestone/Firestone brand. Adding to the resignation pressure, analysts say, were threats of U.S. class-action lawsuits against the parent company and the hit to Bridgestone’s consolidated earnings.
Bridgestone expects earnings for the 12 months ending March 31 to fall 43% below the previous year’s levels to around $434 million, due largely to fallout from the scandal.
Bridgestone has admitted to design and manufacturing problems at its Decatur, Ill., plant, but it also blames Ford for errors in the Explorer’s design. Last month, Bridgestone/Firestone set aside $750 million to cover the costs of its recall of 6.5 million tires and potential legal liabilities, without admitting any.
Moving ahead, the company must work to stem the bleeding.
“Always hanging over Kaizaki’s head was the question of accepting responsibility,” said Shigeharu Kimishima, an analyst with Kokusai Securities. “The change is needed and the company can now begin to rebuild its image.”
While Watanabe has the background to answer technical questions, his appointment also signals to shareholders and consumers that the company takes the problem seriously. That said, he arguably has no marketing or public relations expertise, the lack of which played a big part in the company’s missteps.
Bridgestone’s slow initial reaction also underscores a key management problem for Japanese multinational corporations--a tendency to rely too much on Japanese managers in overseas subsidiaries who do not fully understand the local market. Shareholders, government regulators and consumers are far more supportive in Japan, arguably making Japanese managers a bit sleepy overseas. Bridgestone replaced Ono with John Lampe, an American.
Kaizaki ends his career on a sour note after what many regard as a pretty good eight-year record. Bridgestone has a 45% share of Japan’s tire market. Its Formula One racing links in Europe have boosted its reputation there and, before the scandal it had turned Firestone around following U.S. quality problems.
Despite their mutual finger-pointing, Ford and Bridgestone share an interest in settling individual death and injury lawsuits as quickly as possible out of court without the negative publicity trials would bring.
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Hisako Ueno in the Tokyo bureau contributed to this report.
