Firestone's Rough Road

By Daniel Eisenberg

Watching Masatoshi Ono, CEO of Bridgestone/Firestone, sweat under the nasty glare of Congress during last week's tire-recall hearings, you almost had to feel sorry for the reserved Japanese executive. Ono, a lifelong company man and engineering whiz who joined Bridgestone straight out of university more than 40 years ago, has spent the better part of the past decade propping up the sagging fortunes of Firestone, the U.S. company Bridgestone paid $2.6 billion for in 1988. Now here he was, the prime suspect in the the biggest consumer scare since the Tylenol-tampering case, linked to at least 88 deaths and 250 injuries in the U.S. alone.

"I am more than a little nervous," he said in his tentative English, as three female Japanese interpreters in brightly colored suits hovered nearby. Ono offered a sharp contrast to the carefully scripted performance of Ford boss Jac Nasser, who would later pin the blame squarely on Firestone's tires. He was visibly uncomfortable, expressing regret on one hand, denying any tire defect on the other. And his watered-down apology incited a harsh response. Senator Richard Shelby, Alabama Republican, summed up the general sentiment by asking, "What does it take to put a company on notice that perhaps they've got a defective product out there?"

While Ford is expected to come out of the pileup dented by a few hundred million dollars, the 100-year-old Firestone brand could be completely totaled. Thanks to a generally dreadful crisis management, marked primarily by silence and denials, the Firestone brand has very little credibility left. The public is becoming increasingly skittish about any of Firestone's tires-- the vast majority of which are safe.

As if that weren't bad enough, even Firestone's spin doctors have apparently lost faith in the company; last week, in the wake of the company's refusal to expand the recall to include an additional 1.4 million tires, its p.r. agency, Fleishman-Hillard, quit, reportedly tired of clashing with corporate lawyers. In a statement, Fleishman said it didn't think it could be of further service, refusing to elaborate. "I personally think Firestone is toast," says veteran marketer Jack Trout of Greenwich, Conn., who has previously worked with the company. "It's really a second-tier tire brand with low consumer loyalty."

Not surprisingly, Firestone, which survived the 1978 recall of 14 million defective tires, sees things differently. "We're going to have to struggle a bit to rebuild consumer confidence," Bridgestone/Firestone executive vice president John Lampe told TIME last week. "[But] we definitely feel the brand can be saved."

Significantly, Firestone isn't likely to lose its contracts with major carmakers, although Ford has decided to split its business for the 2002 Explorer among Firestone, Goodyear and Michelin. In fact, GM and Nissan have come to the defense of Firestone, pledging to keep it as a crucial supplier. But officials at Toyota, at least privately, have expressed some reservations.

The much larger, more lucrative replacement market is another story. Only 4% of drivers say they would replace their existing tires with Firestone's, and 58% of suv buyers think Ford should drop Firestones from its vehicles altogether, according to a new survey by CNW Marketing and Research. Firestone will have to convince consumers that its brand stands for something beyond corporate doublespeak.

And that will be the hard part, as it becomes clear that the company was at the very least sluggish, if not obdurate, in responding to mounting evidence that its 15-in. ATX, ATXII and certain Wilderness AT tires were shredding at abnormally high rates. At least six months before Firestone launched the recall of 6.5 million defective tires in early August, it was aware of a steep rise in the number of warranty, damage and injury claims involving tread separations on those suspect models, according to confidential company reports released by congressional investigators. Firestone, which has argued that it didn't know of any pattern of problems until early August, said it didn't typically use such data to assess product quality.

At the same time, an internal Ford memo dated March 12, 1999, showed that Firestone had "major reservations" about launching a recall of 16-in. Wilderness tires in Saudi Arabia because the two companies might then have to notify the National Highway Traffic Safety Administration in the U.S. of their action. A few months later, after Firestone continued to maintain that there was no problem with the tires, Ford unilaterally initiated a quiet replacement campaign in the Middle East, without alerting anyone. The testimony also confirmed that Firestone may well have delayed the recall a month by insisting that Ford sign a confidentiality agreement before handing over the claims data needed to uncover the problem. "We virtually pried the data from Firestone's hands," Nasser told the hearing.

These were just the latest damning revelations in what has become a textbook case of how not to manage a corporate crisis. From the beginning, when Firestone announced a staggered recall that would force some customers to wait months for replacements, the company's damage control has been woeful. "p.r. is a business of subtleties," says a leading crisis manager. "These guys are amateurs."

For effective crisis management, swift, decisive action, not to mention an appropriate level of contrition, is the name of the game today. Firestone has seemed slow and unresponsive, a legacy, perhaps, of its insular parent company in Japan, where consumers have few rights, and product-liability lawsuits hardly exist. Parent Bridgestone's CEO Yoichiro Kaizaki, who gained a tough-guy reputation in shaping the company's American strategy, has been all but invisible. He may be practicing what the Japanese call fugenjikko--no words, only action--but silence is deafening here. "I don't know how you cannot be available for comment when you have a crisis of this magnitude," says William Furlow of Furlow Corporate Communications.

The list of Firestone failures goes on and on: it waited nearly a week to advertise the recall and balked at reimbursing customers for replacing Firestone's with rivals' tires; it broke another cardinal rule by failing to own up from the start to all it knows. Just like fast-food chain Jack in the Box, which initially blamed its meat supplier for the deadly outbreak of E. coli in its hamburgers in 1993, Firestone has continued to point fingers, either at Ford for recommending a lower tire pressure or at drivers for not maintaining the tires properly.

Doing more than you're required has now become the minimum in product recall management. In 1998. for instance, Sara Lee initiated a recall of 35 million pounds of its Ball Park hot dogs and other deli meats contaminated with Listeria while regulators were still debating whether public health was threatened (it was). Firestone has waited at almost every turn for the government's signal to act.

Understandably, Firestone may wish to limit the scope of the recall in order not to risk tarnishing its entire brand or setting off a panic. But when the public is questioning the brand across the board, "perception," notes Susan Bixler, president of the Professional Image consulting firm in Atlanta, "is more powerful than reality."

The reality, that there is a lot of money at stake, isn't that much better. Firestone's Japanese parent has already taken a $350 million charge to cover the cost of the recall, but that may be just the beginning. In addition, there are the hundreds of millions, if not billions, of dollars it could potentially owe from lawsuits. The company's stock market value has plunged some $10 billion in the past month.

The recall came just as Firestone's North American business, which accounts for 40% of Bridgestone's total revenue, was hitting on all cylinders. In the past few years, it has caught up with rival Michelin to become the No. 2 tire supplier in the U.S., behind Goodyear, with some 22% of the estimated $22.5 billion total market, according to Tire Business, a trade newspaper. It won back bragging rights as the key tire sponsor for Indy 500 racing.

Firestone says sales have barely slipped at its 10,000 dealerships, but it is probably too early to assess the long-term impact. Brands can take a beating and still survive, as Firestone itself showed more than two decades ago. Yet this is a new era, with more enlightened consumers--and legions of lawyers in attack mode.

The company is not without options. Firestone could launch an all-out price war, which analysts fear would hurt an industry saddled with rising commodity costs and little pricing power. Points out Wendy Beale Needham, auto analyst at Donaldson, Lufkin & Jenrette: "[Firestone] does have a parent with resources and a different brand name."

That other brand name may be the key. Dropping the Firestone name altogether would be the most drastic measure, but many observers think it is the only viable way to keep the company's beachhead in the U.S. Bridgestone has an established, albeit smaller, place in the North American market as a high-end, premium tire brand, and most consumers don't seem to think of it as falling from the same rubber tree. "Probably the best thing Bridgestone can do with the Firestone name is put it under a rock and forget about it," says Art Spinella, who runs automotive-market researcher CNW.

Ono, unfortunately, still has nowhere to hide. Senator John McCain is scheduled to hold additional hearings this week, and Ono is supposed to give a deposition in a tread-separation case in Texas. His company, meanwhile, will try to do a better job of communicating how it's going to fix the problem. "The public is very forgiving for those institutions that will admit their shortcomings and really level with them all the way," says Harold Burson, CEO of p.r. pioneer Burson-Marsteller. If Firestone is going to remain on the road long after the recall, Ono has to make sure that message, for once, doesn't get lost in translation.

--With reporting by Joseph R. Szczesny/Detroit, Polly Forster/Washington, Tim Larimer/Tokyo and Mike Eskenazi and John Greenwald/New York

With reporting by Joseph R. Szczesny/Detroit, Polly Forster/Washington, Tim Larimer/Tokyo and Mike Eskenazi and John Greenwald/New York