Business and Finance - Asia
Aggressive Bridgestone Slices Ford Relationship
By PETER LANDERS and TODD ZAUN
Staff Reporters of THE WALL STREET JOURNAL
TOKYO -- Japan's Bridgestone Corp., in all but ending its U.S.
unit's 95-year-old ties with Ford Motor Co., is attempting to
reverse the momentum in a blame game it had been losing
over accidents involving its tires.
Bridgestone President Shigeo Watanabe said in a news
conference that his company's U.S. unit had no choice but to
cut its ties with Ford after the Dearborn, Mich., auto maker
asked for a recall of 11 million Firestone tires. Mr. Watanabe
said such a recall, coming on top of a recall of 6.5 million
tires last year, would have been devastating to Bridgestone's
U.S. subsidiary, Bridgestone/Firestone Inc. He insisted the
tires are safe and said Firestone will leave it to U.S.
traffic-safety authorities to decide whether further action is
A large-scale second recall "would be a life-or-death matter"
for Bridgestone/Firestone, Mr. Watanabe said.
Bridgestone faces great risks in cutting
the company's ties with Ford. The tire
maker's stock price plunged 9.4% to
1,268 yen ($10.33), off 131 yen, on
worries over the impact of the lost
business. On the same day, Moody's
Investors Service Inc. said it might cut
its rating on some of
Bridgestone/Firestone's debt amid
concern that terminating business with
Ford would hurt the tire maker's profit.
But analysts said the decision to stop selling tires to Ford
might work in Bridgestone's favor. That's because
Bridgestone had been losing an increasingly public battle
with Ford over which of them was more at fault in the series
of crashes that led to last year's massive tire recall.
Distancing itself from the U.S. auto maker will allow
Bridgestone/Firestone to be more aggressive in making its
case that Ford shares some of the blame, the analysts said.
The cutoff of ties with Ford applies only to Firestone tires
sold for use on new vehicles in North America, Central
America and South America. Firestone will continue to provide
tires to Ford in Europe and Asia.
Mr. Watanabe stressed that he is in close contact with
Bridgestone/Firestone Chief Executive John Lampe and
agrees with the decision to cut ties with Ford. Mr. Watanabe,
speaking in Japanese, used many of the phrases Mr. Lampe
had in criticizing Ford. According to Mr. Watanabe, the two
men spoke Sunday after Ford started hinting that it would
ask for a large new recall of Firestone tires. The men
discussed various options and agreed that in the worst-case
scenario, Mr. Lampe should sever relations with Ford. "Lampe
is the person who ultimately made the decision," said Mr.
Watanabe, adding that Bridgestone hadn't considered such a
move until Sunday.
Since Bridgestone/Firestone is a wholly owned subsidiary of
Bridgestone Corp., it would be difficult for the parent to
somehow wash its hands of Firestone's problems. Moreover,
Bridgestone has invested a great deal of money and
management resources in Bridgestone/Firestone since buying
the U.S. company in 1988, and Firestone is the linchpin of
Bridgestone's global strategy.
Last year, Bridgestone/Firestone recalled 6.5 million of its
15-inch Wilderness, ATX and ATX II tires that were linked to
accidents involving 174 deaths and hundreds more injuries in
the U.S. alone, mainly in rollovers of Ford Explorers. Ford has
maintained that the problem is solely with the tires, while
Bridgestone alleges the design of the Explorer is also partly
to blame for the high rate of tire failures.
Bridgestone already has set aside $800 million to pay for last
year's recall and the expected cost of settling lawsuits
involving recalled tires. The larger recall that Ford is
demanding would cost Bridgestone as much again or more,
On the other hand, Bridgestone estimates that losing Ford as
a customer will cost the Bridgestone group only about 1.5%
of its revenue, or about $239 million. Bridgestone expects to
pull in about 1.95 trillion yen ($15.89 billion) in sales this
Write to Peter Landers at email@example.com and Todd
Zaun at firstname.lastname@example.org