Major Business News
Ford Will Replace Millions of Tires Congress Looks to Renew Hearings
By JOSEPH B. WHITE, STEPHEN POWER and MILO GEYELIN
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
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
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
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
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 firstname.lastname@example.org, Stephen
Power at email@example.com and Milo Geyelin at