Review of Subsidiary
Comes Amid Tire Crisis
By PHRED DVORAK and MICHAEL WILLIAMS
Staff Reporters of THE WALL STREET JOURNAL
TOKYO -- Bridgestone Corp., reeling from the controversy over
accidents involving vehicles equipped with its U.S. subsidiary's Firestone
tires, is considering a major management shakeup at its
Bridgestone/Firestone Inc. unit.
Bridgestone's chief executive and president,
Yoichiro Kaizaki, in his first interview with the
foreign media since the Aug. 9 recall of Firestone
tires in the U.S., said he plans to make a
decision about Bridgestone/Firestone's
leadership team this month, but he declined to provide details about
which executives might be removed and who might succeed them. Both
Mr. Kaizaki and Bridgestone/Firestone's CEO, Masatoshi Ono, have
come under criticism for not responding more quickly and forcefully to
consumer fears in the U.S., where 88 people have died in accidents
involving Ford Explorers equipped with Firestone tires.
Mr. Kaizaki also said it is possible that Bridgestone/Firestone might have
to temporarily shut the company's factory in Decatur, Illinois, which
produced a high percentage of the tires involved in the tread-separation
accidents, if improvements need to be made to the plant's equipment or
facilities. Moreover, he didn't rule out the possibility of a permanent
shutdown of the Decatur plant, saying that such a decision will depend
on how Firestone tire sales perform in the wake of the crisis.
Yet Mr. Kaizaki said that although Bridgestone was aware of "variations"
in the manufacturing process at the Decatur plant compared with those
at other Bridgestone/Firestone plants, he said he doesn't think the
factory had production problems. He also disputed reports in the U.S.
media last week that local Bridgestone/Firestone management had said
the company made bad tires.
"We aren't admitting any defects with our tires," Mr.
Kaizaki said, ratcheting up his campaign to deflect
efforts by Ford Motor Co. to pin the blame for the
accidents on Firestone tires.
This remark appeared to contradict a statement
made before the U.S. Senate's Commerce
Committee last week by a Bridgestone/Firestone
executive vice president, John Lampe, who said the
company had "made some bad tires." A Bridgestone
spokeswoman in Tokyo said Bridgestone doesn't
believe Mr. Lampe made such a comment, which was
reported widely in the U.S. media and is attributed
to him in a transcript of the hearing.
Tire-Pressure Concerns
Instead, Mr. Kaizaki sought to turn attention to Ford's Explorer sport
utility vehicle, while stopping short of assigning direct blame to the
car
maker. "Ford is saying this is 100% Bridgestone/Firestone's fault," he
said. "But were Bridgestone/Firestone tires really the only thing wrong?"
Mr. Kaizaki went on to answer that question by reiterating
Bridgestone's argument that Ford had recommended a relatively low tire
pressure be used on the vehicles. (Lower air pressure adds to the
stress on a tire.) He added that the Explorer had a much higher
incidence of rollover accidents involving Firestone tires in which the
tread
peels off than did other vehicles using the same tires. He also said that
even when tires blow out, vehicles don't usually roll over, as often
happened with the Explorers in question.
"We can't say it is [a problem with] the Explorer, but we can say, the
accident rate is much higher on the Explorer" than on other vehicles,
Mr. Kaizaki said. "These are the facts."
Mr. Kaizaki stressed that Bridgestone/Firestone is recalling tires to quell
consumer concern over the high incidence of Explorer accidents, not
because it thought Firestone had quality problems. "We don't think our
tires are that bad," he said. "Virtually all the tires we are recalling
... are
good."
Expanding on comments he made at a news conference last week, when
he said Bridgestone will give full support to its Firestone unit, Mr.
Kaizaki said Bridgestone has sent development and production teams to
U.S. factories to check all types of Firestone tires, not just the ones
used on the Explorer. Bridgestone also will provide financial support to
Bridgestone/Firestone to tide it through the crisis, he said, adding that
the unit would have trouble raising funds on its own after Moody's
Investors Service downgraded the credit ratings of both Bridgestone
itself and the U.S. subsidiary.
Confident Outlook
Mr. Kaizaki said his first priority is to conclude the tire recall as quickly
as possible, and he added that the company expects to finish that
effort in November. Only after the recall is over will he consider
implementing a publicity campaign to reach out to U.S. consumers.
"Even if we said something now, it would be counterproductive" to
conduct such a campaign at the moment, he said.
Yet Mr. Kaizaki is confident that U.S. consumers will return to Firestone
once the recall is completed, pointing out that the company managed to
rebound after a 1978 recall that affected a much wider range of vehicles.
He also said he intends to stick with the Firestone brand, and he
dismissed speculation that the company will pull out of its involvement
in the CART auto-racing circuit in the U.S., a role that Mr. Kaizaki
initiated in 1995 as a sign of Firestone's recovery from the slump
precipitated by its previous recall. Sales are likely to increase after
the
crisis has been settled, he said.
"While everyone is ganging up on us, no customers are going to go out
of their way to buy our tires," Mr. Kaizaki said. "But after we faithfully
recall the tires and recover, I think there is plenty of possibility that
those customers will return."
Mr. Kaizaki also is confident that he might be able to salvage Firestone's
long relationship with Ford, which has taken a bitter turn in the U.S.
and
Venezuela, where Explorer accidents also are under investigation.
He said that at most $1.3 billion of Bridgestone/Firestone's $5.6 billion
in annual U.S. tire sales will be affected by the recall. Bridgestone
estimates that its tire sales to Ford account for $350 million in the U.S.
Mr. Kaizaki said Bridgestone's direct losses from the recall will amount
to more than the $350 million projected, although he couldn't say
"whether it will be another $100 million, or more."
This isn't the first time Mr. Kaizaki has had to deal with troubles at
the
Bridgestone/Firestone unit. The company sent him to the U.S. to turn
around the unit in 1991, shortly after Bridgestone bought the U.S.
company and at a time when Firestone was still suffering the
aftereffects of its 1978 recall. Mr. Kaizaki is credited with having
launched Firestone's recovery.
Yet Mr. Kaizaki, 67 years old, said the heat he is feeling from
consumers, the media and politicians has made handling this tire recall
much more difficult than dealing with the other Firestone-related
problems he faced in the past, such as a long strike in the mid-1990s.
And while he declined to comment on who might serve as the Firestone
unit's next leader, he said that he himself won't take a direct executive
role in running the subsidiary, either in the U.S. or from Japan.
Write to Phred Dvorak at phred.dvorak@wsj.com and Michael Williams
at michael.williams@wsj.com