Firestone, Ford and the Explorer Tire Recall

The story

Ford and Firestone had worked together for many decades, and Firestone was a major supplier of tires for Ford vehicles. In the 1990s, one of Ford's best-selling products was the Explorer, a popular sport utility vehicle (SUV), and many Explorers came with Firestone tires.

Trouble showed up first in other countries. In hot places like Saudi Arabia and Venezuela, the tread on some Firestone tires was peeling away from the tire at highway speed, a failure called tread separation. When that happened on an SUV, the vehicle could swerve and roll over. In 1999, Ford began replacing tires on Explorers in Saudi Arabia, and in May 2000 it did the same for about 150,000 tires in Venezuela. In the U.S., a researcher at State Farm insurance noticed a pattern of tread-separation claims in 1998 and 1999 and forwarded them to the federal car-safety agency, NHTSA.

On August 9, 2000, Bridgestone/Firestone, the U.S. arm of Japan's Bridgestone, announced a recall of about 6.5 million tires: certain sizes of its ATX, ATX II and Wilderness AT models. Many of the worst-performing tires had been made at a Firestone plant in Decatur, Illinois. Congress held hearings in September, and by November 2000 it had passed the TREAD Act, a law requiring car and tire makers to report safety problems, including problems found overseas, to U.S. regulators sooner.

As the crisis grew, the two companies turned on each other. Firestone argued that the Explorer itself was part of the problem, pointing out that Ford had recommended a fairly low tire pressure of 26 pounds per square inch, which can make tires run hotter. Ford said the tires were the problem. In October 2000, Firestone's top executive, Masatoshi Ono, resigned. On May 21, 2001, Firestone's new chief, John Lampe, wrote to Ford's chief executive saying Firestone would no longer sign new contracts to supply Ford. The next day, Ford announced it would replace all of its remaining Wilderness AT tires, about 13 million of them, at a cost of about $3 billion.

The government had the final word on the technical question. In October 2001, NHTSA reported that many Wilderness AT tires made before May 1998 had a safety defect, and Firestone agreed to recall another 3.5 million tires. NHTSA linked 271 U.S. deaths to rollovers and other crashes involving the tire failures. It also said Explorers with tread separations were no more likely to crash than other SUVs and that it "found no basis" for Firestone's claims against the Explorer. Firestone disputed the report, and Ford said it was vindicated. Firestone closed the Decatur plant at the end of 2001 and agreed that November to pay $41.5 million to settle lawsuits brought by states.

Both brands were badly damaged, and families were left grieving. The case is often taught because so much went wrong at once. Warning signs overseas were not shared quickly with U.S. regulators. Two longtime partners argued in public instead of solving the problem together. And customers, who simply wanted to know whether their family car was safe, were caught in the middle. Any business that depends on suppliers or partners can learn from it: agree on how you will handle a crisis before one comes.