By KATHRYN KRANHOLD and ERIN WHITE
Staff Reporters of THE WALL STREET JOURNAL
The nadir of a corporate crisis may be when the crisis-management
counselor walks away in frustration.
Although neither side will publicly discuss why
Omnicom Group Inc.'s Fleishman-Hillard quit the
Bridgestone/Firestone account this past
Sunday, those familiar with the situation say the
giant public-relations firm grew disturbed with
Firestone's refusal to communicate the breadth and seriousness of its
problems.
Now Firestone is looking for a new crisis manager, and at least one firm
the tire maker has approached declined the job. Bob Druckenmiller, chief
executive of Porter Novelli, also owned by Omnicom, says his company
talked with Firestone over Labor Day weekend about possibly taking on
the account but ultimately declined. "The feeling was that we couldn't
get in there and be helpful under the circumstances," says Mr.
Druckenmiller.
Still, a number of other firms are interested in succeeding Fleishman.
Part of the attraction: According to one crisis manager, the Firestone
account could easily generate $1 million of fees a month.
For an incoming agency, the situation could be a no-lose proposition --
just as the debacle quickly became a no-win proposition for Fleishman,
some industry insiders say. If the new agency is able to polish
Firestone's tarnished image, it will be perceived as savvy, even heroic.
If
its efforts fall short, there won't be much fallout because Firestone is
already in such serious trouble.
Fleishman, according to people familiar with the situation, was unaware
that a tire problem loomed that would put Firestone, a unit of Japan's
Bridgestone Corp., in crisis mode only two weeks after the agency was
hired. Firestone's announcement that it was recalling 6.5 million tires
effectively put the company under siege.
As the crisis unfolded, Fleishman executives concluded they were
receiving incomplete and questionable information from Firestone
executives in the U.S. This made it difficult to give good advice or to
effectively represent the company, say individuals familiar with the
situation.
Christine Karbowiak, Firestone's vice president of public affairs, says
"to
the best of our ability, we provided information." She says the
"integrity" of the information provided to Fleishman executives "has
never been an issue."
In any case, Firestone didn't follow most of Fleishman's advice, relying
instead on the cautious counsel of its lawyers, individuals familiar with
the matter say. The agency, for example, is said to have urged
Firestone to move forward with a proactive plan of action to restore
consumer confidence. This included issuing an immediate apology for
the faulty tires and quickly recalling and replacing those tires.
Instead, Firestone was either slow to respond or waffled, according to
individuals familiar with the situation. Ms. Karbowiak says "everyone's
advice is considered and acted upon as appropriate."
Last Friday, after the National Highway Traffic Safety Administration
issued a consumer advisory saying an additional 1.4 million tires should
be inspected, Bridgestone/Firestone issued a statement saying few of
those tires were still on the road. Nonetheless, it offered to replace
those tires if owners were concerned about them.
Then, the very next day, Bridgestone/Firestone issued a statement
from Masatoshi Ono, its chairman and chief executive, retracting the
Friday offer. Instead, Mr. Ono equivocated, saying: "If the tires are
subject to our Bridgestone/Firestone warranty program, the tires will be
adjusted and processed accordingly."
Ms. Karbowiak says the second statement was a clarification. Although
the company wasn't offering to outright replace customers' tires not
under warranty, she says, Firestone has had a store policy that
customers can return tires and receive a discount if they replace them
with Firestone tires. The discount is based upon how used the tire is.
If
a customer has used up 50% of the tire, the customer will receive 50%
off the price of a replacement Firestone tire.
But a frustrated Fleishman resigned the next day. (Fleishman provides
public-relations advice to Dow Jones & Co., which publishes The Wall
Street Journal and WSJ.com.)
In fact, Fleishman was the second agency to part ways with Firestone.
Burson-Marsteller, the world's biggest public-relations agency, worked
for both Ford Motor Co. and Firestone in the months before the tire
recall was announced. Individuals familiar with the situation say Burson
learned about the tire problem and the possibility of a recall not long
before it became public. The firm feared a conflict in PR strategy
between its two clients in what would become one of the biggest
product recalls since Perrier cleared store shelves of its bottled mineral
water in 1990.
Burson alerted Firestone that it was also working with Ford, and the
two companies decided to part ways, agency people familiar with the
matter say. Firestone's Ms. Karbowiak said Burson stopped doing
strategy work for Firestone in late May but continued to help the agency
until shortly before it hired Fleishman in mid-July.
Burson continues to work with Ford, which is parent Young & Rubicam's
biggest client, but it isn't providing the auto maker with advice on the
tire recall. Ford is handling the crisis internally using its own staff,
industry executives say.
Firestone's Ms. Karbowiak declined to discuss the public-relations firms
that the company has contacted or is considering hiring to replace
Fleishman.
But the tire maker or its representatives have already contacted
Ketchum, another Omnicom unit. David Drobis, Ketchum's chairman,
says the firm is considering taking on Firestone, and is planning to meet
with the company within a week.
Robbie Vorhaus, chief executive of the New York firm Vorhaus & Co.,
says he was also approached this week by a Firestone "intermediary."
"We told them what Vorhaus is known for -- helping companies tell the
truth," says Mr. Vorhaus. "If they want help in telling it, we'd be happy
to help them."
In addition, Shandwick International's Rowan & Blewitt, which worked
with Exxon Corp. following the 1989 Exxon Valdez oil spill, has been
contacted by a Firestone intermediary, says a person familiar with the
situation. The firm, a unit of Interpublic Group of Cos., declines to say
whether it is pursuing the account.
Other firms that could be candidates for the job include Edelman Public
Relations Worldwide, and GCI Group, a unit of Grey Global Group. Larry
Kamer, who heads the crisis practice at GCI Group, says he would
welcome the business, noting that parent Grey has long been a major
ad agency for Firestone. Mr. Kamer declined to comment on whether his
firm has been contacted.
Most observers say that Fleishman made the right call in resigning and
doubt the decision will affect its crisis-management business -- or scare
away future clients. "They had to resign the business. It would do more
damage to their reputation than anything else out there," says Allen
Adamson, a managing partner at the brand consulting firm Landor
Associates, a unit of Young & Rubicam.
Indeed, Fleishman's actions have put a spotlight on the
crisis-management industry, one of the hottest areas of corporate
consulting. Some date the industry back to the 1960s, when companies
encountered civil-rights and environmental challenges to products like
the pesticide DDT.
Back then, Burson-Marsteller, for one, conducted seminars with plant
managers on how to deal with protests or explosions for its
manufacturing client Owens Corning, says Harold Burson, the founder
and chairman of Burson-Marsteller. The firm counseled Dow Corning on
how to deal with groups protesting its manufacture of deadly chemicals
during the Vietnam War. And it advised Johnson & Johnson during the
poisoned Tylenol episode, a major early success for crisis management.
More than 60 firms nationwide now counsel corporations involved in
product recalls, labor disputes and environmental disasters, among
other issues. In 1999, public-relations revenue grew about 30% from
the prior year to nearly $3 billion, according to the Council of Public
Relations Firms, a trade group. Crisis management accounted for
slightly less than 4% of the total, or roughly $100 million.
In the last five years, the biggest advertising and marketing
corporations, including Omnicom and Interpublic, have bought leading
public-relations agencies that boast crisis-management units. Omnicom
bought Fleishman-Hillard, now the largest public-relations firm in the
U.S., in 1997. And a year later, Interpublic acquired Shandwick
International, which owns the crisis firm Rowan & Blewitt.
Restoring Public Trust
Professional crisis-managers recommend these steps when a company
is under stage:
DO:
Recognize that speed is crucial. "If you don't have an answer or
a solution to the problem, you better be able to tell your
audiences that you're working on one," says Rich Blewitt,
president of Rowan & Blewitt.
Place customers' interests above your own. A company must
"seem to want to come to the aid of the people in the crisis first,
and their own corporate interests last," says Larry Kramer,
managing director at GCI Group.
Take a long-term view. As the massive Tylenol recall showed,
sacrificing a product's image in the short-term can demonstrate
responsibility in the long haul.
DON'T:
Hide what you know. Being one step behind when evidence of
wrongdoing surfaces not only damages your credibility, but also
hinders your ability to control the spin, says Victor Kamber, CEO
of The Kambler Group.
Get tied down in the day-to-day details of running the
company; make the crisis No. 1 priority. "You've got to have a
bunch of people who drop everything and just deal with this,"
says Mark Braverman, principal, CMG Associates Inc.
Forget that public perception is more important than reality.
Even if you've done nothing wrong but consumers think you have,
their view is what matters, says Steven Fink, president of Lexicon
Communications Corp.