Ford, Firestone Locked in a War They Can’t Win
Ford and Firestone have shattered their 95-year-old business relationship and escalated their war of words over tire failures and the Explorer sport-utility vehicle, but corporate and image experts say the two companies are hurting only themselves.
“It’s insane. It’s mutually assured destruction,” said Gerald Meyers, former chairman of American Motors who teaches courses on corporate crisis management at the University of Michigan Business School.
“No businessman in his right mind would suicidally go after a big supplier in the knowledge that this would damage one of his top profit earners,” Meyers said, estimating that Ford clears up to $10,000 in profit for each Explorer sold. “You let the other side know you will do something crazy if they do something to hurt you.”
Apparently realizing that Ford Motor Co. was about to announce a massive recall of 13 million Firestone tires that was twice as big as last year’s, Bridgestone/Firestone Inc. on Monday severed its long- standing ties with Ford, saying it no longer would sell tires to the world’s second-largest auto maker.
Ford went ahead with the recall announcement Tuesday, and all week both companies traded accusations.
Ford Chief Executive Jacques Nasser said Firestone has ignored evidence that millions of tires not recalled last year could be unsafe.
Bridgestone/Firestone CEO John Lampe fired back that there is increasing evidence that Ford’s Explorer up to the 2001 model year is fundamentally unsafe, flipping over and causing fatalities when Firestone tires lose their treads.
In a turnaround from its cautious but polite statements during last year’s recall, Firestone now appears to be going for the jugular by trying to bring down the Explorer, a big cash cow for Ford.
Does Ford worry about that?
“We’ve thought about it,” acknowledged a source at Ford who has worked on the tire crisis. “You don’t praise your suppliers, and you don’t trash them. We don’t give any speeches on behalf of our suppliers because the guy you praise today might screw you tomorrow. You stay neutral. And we didn’t stay neutral with Firestone.”
With Bridgestone/Firestone severely weakened, Ford may have more at stake--it already says the current recall will cost $3 billion and wipe out second-quarter profit. But with its collection of brands ranging from Ford, Lincoln and Mercury to Mazda, Volvo, Jaguar and Land Rover, it probably can absorb image hits more easily.
It’s also not clear that Firestone has any real ammunition against the Explorer.
“That would seem awfully difficult,” said Joseph Phillippi, an auto supplier industry analyst with UBS Warburg in New York. “They don’t have the engineering resources to come up with an answer that blames the Explorer, either with a foregone conclusion or in an open, honest manner.”
The two sides should have kept calm last week, giving themselves a 72-hour cooling-off period before deciding whether they really wanted to make their respective draconian moves, Meyers said. “They should have told each other, don’t do something you might regret.”
Indeed, the threat of each other’s actions could have had a unifying effect, said Marvin Lieberman, professor of policy at UCLA’s Anderson School.
“There is a theory of making it costly to the other side if they hurt you,” Lieberman said. “A lot of business relationships are held together by the ability to cause harm.”
What Ford and Firestone should have done is keep each other at bay while continuing to hammer out some kind of cooperation, even a contentious one, said Dennis Gioia, professor of organizational behavior at Pennsylvania State University’s Smeal College of Business and a former recall coordinator at Ford.
“The net effect is to confuse the public,” which hurts both companies, Gioia said.
“Consumers don’t want to hear . . . every pimple, every fault,” said Michael Bernacchi, professor of marketing at the University of Detroit-Mercy. “They want someone to come forth, take responsibility, fix it and move on.”
Neither side seemed willing to do that, and did themselves immeasurable damage, he said.
Firestone probably felt it had no other option than to go on the attack, Gioia said. “Firestone has already admitted to making a faulty tire--there’s no going back.”
And Firestone can’t gain anything by blaming tire failures on customers driving long stretches in high temperatures on underinflated tires in overloaded SUVs, he said.
“They can’t blame the victims,” Gioia said. “Firestone tried that last year and got slapped down hard.”
The public nature of the spat and the sudden vigor shown by Firestone has taken observers by surprise.
Last week, Nashville-based Bridgestone/Firestone bombarded the media with charts showing that Explorers equipped with Firestones rolled over 10 times more often than Ford Ranger pickups on identical tires. They also sent copies of news reports about a fatal Explorer rollover in Texas that did not involve Firestone tires and about Venezuela’s consumer protection agency seeking a ban on Explorer sales.
The tire maker also released data it had shared with a congressional committee that purported to show that Explorers are twice as likely to roll over in tire-related accidents as any other SUV.
Ford responded by also distributing charts to the media via its Web site that showed Goodyear tires performing virtually flawlessly on Explorers, and putting the Explorer among the safest of 12 comparable SUVs.
“Don’t these people ever talk to each other alone?” wondered John Allen, a partner in Lippincott and Margulies, a New York consultancy that advises companies on corporate identity.
“It’s like [New York Mayor] Rudy Giuliani’s divorce being played out on TV,” Allen said. “You’ve got two companies saying, ‘Your trucks roll over,’ and ‘Your tires blow up.’ This endgame is one of burning bridges and destroying brands. It certainly seems there should have been other options.”
Last week’s shrill exchanges taint both companies. “Was it that Ford squeezed margins of components so much that you can’t build a safe tire? Or did Firestone not keep an eye on the ball?” Allen asked. All that’s clear is “you’ve got two brands on fire.”
Ultimately, top Ford executives may have the most to lose, said Meyers, the former AMC chief. “If a sector of [the board of] directors gets unhappy, that could lead to possible change in management, the direction of the company, or bonuses,” he said. Ford’s Nasser earned a $7.7-million bonus last year.
“Now you’re talking what matters.”
