May 23, 2001

                    Major Business News

                    Ford Will Replace Millions of Tires Congress Looks to Renew Hearings

                    Staff Reporters of THE WALL STREET JOURNAL

                    Ford Motor Co. launched a massive campaign to replace more
                    tires as congressional investigators called for fresh hearings
                    on the safety of both Ford Explorers and Firestone tires.

                    Ford Chief Executive Officer Jacques
                    Nasser said the auto maker will spend
                    as much as $3 billion to replace 10
                    million to 13 million Firestone
                    Wilderness tires that weren't subject
                    to last summer's recall initiated by
                    Bridgestone/Firestone Inc. Mr. Nasser
                    said the move was precautionary, and
                    that so far Ford has seen only a very
                    small number of tread-separation
                    problems involving the Wilderness
                    tires. But, he said, Ford is concerned
                    that as these tires get older they
                    could begin to fail at higher rates.
                    "We simply do not have enough
                    confidence in the performance of
                    these tires keeping our customers
                    safe," Mr. Nasser said.

                    The move followed Firestone's action
                    on Monday to sever business ties with
                    Ford, as the companies continued to
                    accuse each other's products of being
                    responsible for accidents that
                    preceded last summer's recall of 6.5
                    million tires. Those accidents have
                    been linked to 174 U.S. traffic deaths
                    and more than 700 injuries, mostly
                    involving rollovers of the Explorer that
                    occurred after Firestone tires suddenly lost their treads. The
                    public brawling, and the sudden assertion by Ford that tires
                    the company declared safe last summer actually may not be,
                    is bound to cause confusion among consumers and
                    consternation among lawmakers.

                                      Ford said it will take a charge to earnings of
                                      $2 billion in the second quarter to cover the
                                      costs of the replacement program. The
                                      charge was bigger than many analysts had

                                      Wall Street had been looking for Ford to
                                      earn about $2.60 a share for the full year,
                                      or about $4.7 billion. Chief Financial Officer
                                      Henry Wallace told analysts Tuesday that
                                      the company now expects to earn $1.25 to
                                      $1.35 a share, or about $2.4 billion. Ford
                                      also will suspend its share-repurchase
                    program to conserve cash. North American Operations Chief
                    Martin Inglis said he was undertaking even deeper cost cuts
                    to absorb the impact.

                    Mr. Wallace warned that the action could also hurt the launch
                    of the newly redesigned Explorer, lead to higher borrowing
                    costs and undermine residual values of Ford vehicles. "We've
                    got a big challenge ahead of us," Mr. Wallace said.

                    Mr. Nasser said during a press conference Tuesday that Ford
                    decided to replace the tires after data the auto maker
                    received from Firestone showed "actual failure rates were
                    tending upwards" for Firestone Wilderness AT tires not
                    covered by last summer's recall.

                    In a statement, Bridgestone/Firestone CEO John Lampe said
                    in response, "No one cares more about the safety of the
                    people who travel on our tires than we do. Our tires are safe.
                    When we have a problem, we admit it and we fix it. We've
                    proven that. The real issue here is the safety of the Explorer.
                    Ford refused to look at issues surrounding the Explorer in
                    August. Ford failed to do that today."

                    Rep. W.J. "Billy" Tauzin (R., La.), chairman of the House
                    Commerce Committee who led last fall's hearings on the
                    Firestone recall and was one of the toughest critics in
                    Congress of both companies, said he will hold another round
                    of hearings after Memorial Day that will examine Ford's latest
                    accusations about Firestone tires. Mr. Tauzin said his panel
                    would also examine Firestone claims that the Ford Explorer's
                    design made it unstable and that the auto maker
                    recommended a tire-inflation level that was dangerously low.

                    In lengthy presentations to federal regulators, Ford has
                    asserted that the Explorer's stability and handling are
                    comparable to or better than similar SUVs, and has argued
                    that other manufacturers safely use the same inflation
                    specification of 26 pounds per square inch. Ford data
                    presented to the National Highway Traffic Safety
                    Administration also show significant differences in the safety
                    records of Firestone tires used on Explorers, with tires from
                    certain Firestone plants performing almost perfectly while
                    others show serious problems. Ford officials say that kind of
                    trend points to the tires, not the vehicle, as the problem.

                    Ford said it decided to go ahead with the
                    replacement program after analyzing data
                    on the road performance of the Firestone
                    tires, comparisons with tires from other tire
                    makers, and a review of information from
                    the NHTSA and extensive laboratory testing.

                    Ford said many of the nonrecalled
                    Wilderness AT tires appear to perform
                    substantially better than the tires recalled
                    last year. The previously recalled tires had
                    failure rates of between 60 and more than
                    200 per million tires. The tires Ford is
                    replacing now have problem rates of about 15 per million. But
                    the company was still concerned that the failure rates would
                    rise in the future as the tires aged, and as seasonal
                    temperatures began to rise in the Southern U.S.

                    Joining Mr. Nasser Tuesday was company Chairman William
                    Clay Ford, Jr., a great grandson of both Henry Ford and
                    Harvey Firestone. Last summer, Mr. Ford stayed in the
                    background as Mr. Nasser led the company's response to the
                    recall crisis. Tuesday, Mr. Ford declared, "Our bond with our
                    customers is only as good as the trust between us," and
                    added, "This decision is a painful one for me personally."

                    Firestone, which earlier this week released its own analysis
                    that pointed to problems with the Explorer, said it has
                    confidence in the quality of its tires and welcomed the
                    chance to come before congressional leaders to present its
                    findings. "We believe there are significant safety concerns
                    with a substantial segment of Ford Explorers," said
                    Firestone's Mr. Lampe. "We look forward to presenting our
                    information to the committee and showing them our tires are

                    This week's developments followed what seemed to be a
                    relatively quiet time for both companies, in which they
                    appeared to be working together to pinpoint the cause of the
                    tire failures that led to last year's recall and to put the crisis
                    behind them.

                    Reflecting the uncertainty about the potential damage of the
                    renewed fracas, Moody's Investors Service changed Ford's
                    credit outlook to negative from stable, while affirming its
                    current A-2 debt rating. Standard & Poor's placed
                    Bridgestone/Firestone and its Japanese parent, Bridgestone
                    Corp., on watch for a possible downgrade but affirmed Ford's

                    Ford said it will replace all Firestone Wilderness AT tires, in
                    15-inch, 16-inch and 17-inch sizes, on Ford products, and all
                    Wilderness tires purchased as replacement tires. Ford plans
                    to use replacements provided by Goodyear Tire & Rubber Co.,
                    France's Groupe Michelin and Germany's Continental AG.
                    Customers can get new tires free from Ford and
                    Lincoln-Mercury dealers, and Ford will reimburse customers
                    who get tires at independent dealers.

                    To free up more tires, Ford will idle production of Explorers,
                    including the new 2002 model, for one week and idle
                    production of Ranger pickups, which use similar tires, for two
                    weeks. Those production cuts will slice into Ford's bottom
                    line, but the company has heavy inventories of the trucks due
                    to slower-than-expected sales. Still, the cut adds a further
                    glitch to the launch of Ford's redesigned 2002 Explorer and
                    Mercury Mountaineer, just days after the company announced
                    it was recalling about 50,000 of the vehicles for an unrelated
                    tire problem caused by a manufacturing snafu.

                    Mr. Inglis, Ford's North American chief, said the 2002 Explorer
                    had a "a pretty good start," but the company will retool
                    advertising to drive home the message that the vehicle is
                    substantially new.

                    Goodyear said it was rushing to build more tires to meet
                    increased demand. "We are working very closely with the
                    Ford Motor Co. to jointly develop an aggressive plan to
                    address consumers' needs as quickly as possible," Goodyear

                    Last year's recall sparked a stampede by consumers to find
                    replacement tires, leaving dealers short.

                    John Mathews, general manager of San Antonio's Red
                    McCombs Ford, a large Texas dealership, said Ford hadn't
                    told dealers as of Tuesday morning how the recall would be
                    carried out. Mr. Mathews said he was on the phone all
                    morning Tuesday trying to buy up as many tires as possible,
                    and is adding four workers to the service department to help
                    handle the recall, bringing the tire-replacement staff to 12.

                    At this point, Ford will bear the entire cost of the
                    replacement program. But Firestone could be forced to pick
                    up costs should government authorities decide an official
                    recall is warranted. A wider recall has been widely considered
                    as being potentially fatal to Firestone, which is already
                    reeling from the cost of the first recall and mounting
                    litigation costs.

                    The action comes as Ford and Firestone face another
                    prominent personal-injury lawsuit related to last summer's
                    recall. The plaintiff in the suit is a 39-year-old brain damaged
                    and wheelchair-bound mother of three who was injured when
                    the 1998 Ford Explorer she was a passenger in rolled over in
                    March 2000.

                    According to the suit, the Explorer was equipped with 15-inch
                    Firestone Wilderness AT tires, the same tires that were the
                    focus of last summer's recall. The Explorer allegedly careened
                    out of control after the right rear tire peeled apart. The case,
                    scheduled to begin trial June 4 in Hidalgo County State Court
                    in Texas, is one of 174 pending against Ford and Firestone in
                    state courts nationwide brought by Little Rock, Ark., plaintiffs
                    lawyer Tab Turner.

                    More than 200 individual and wrongful-death suits have been
                    filed in federal courts nationwide. Those suits and a number
                    of national class-action suits have been consolidated in
                    federal court in Indianapolis for pretrial purposes. Firestone
                    and plaintiffs' lawyers initiated settlement talks to resolve all
                    the class-action litigation last December, an option Ford
                    pointedly rejected. Last month, with talks apparently still
                    under way, the federal judge in Indianapolis overseeing the
                    cases slapped a gag order on Ford, Firestone and plaintiffs'
                    lawyers to prevent them from discussing the talks.

                    In Washington, Mr. Tauzin's committee will examine the
                    charges and countercharges related to the tire-safety
                    problem and could move beyond the scope of a continuing
                    investigation by the NHTSA. The agency has said it is
                    focused solely on Firestone tires as it investigates whether
                    Firestone's recall should be broadened beyond the 6.5 million
                    tires already recalled. NHTSA spokesman Rae Tyson said the
                    agency hopes to issue its report sometime this summer and
                    still views its assignment as a "tire investigation."

                    -- Timothy Aeppel in Pittsburgh contributed to this article.

                    Write to Joseph B. White at, Stephen
                    Power at and Milo Geyelin at