The Firestorm Over Faulty Tires Provided A Real-Time Case Study Of Public Relations Failures In A Crisis Situation.

It was a late addition to the Annual Conference agenda but it proved to be one of the most compelling moments of the Charleston meeting.

In a telephone conversation with Ron Culp several weeks before the meeting, Jim O'Rourke was reviewing case studies that he had on the shelf, so to speak, at Notre Dame's College of Business Administration. Agreeing that they seemed like yesterday's news, they began to run through other possibilities, something that was happening right now. When Firestone was mentioned, Culp was all ears. Sears was a bit player in the drama that was rapidly unfolding and a deal was struck to put the Firestone case study on the agenda at Charleston.

Presenting the case for discussion, O'Rourke pointed out that this was a work-in-progress. "I finished it about five o'clock last Thursday," he said, "and FedExed it to Charleston so you would have it in your packets when you arrived. Like any business school case study, it deals with circumstances that are difficult and uncertain. And while there are no right answers, there are many possible solutions. Our aim here is to see what your thinking is."

The facts of the case, O'Rourke said, are essentially these:

• This is not a small recall but it's not the largest ever. Nor is it Firestone's first recall; they've had three others during the past 22 years.
  
  
• Most of the tires were installed on Ford Explorers which has given Firestone an opening to pin some of the blame on Ford. But keep in mind that other brands of tires were installed on the Explorer and they have not experienced the same kind of tread separation.
  
  
• The reports of faulty tires date back to 1996. This is a complicating factor because it tells us that responsible people knew as long as four years ago that something was wrong. It's not something that exploded overnight so that neither company had time to prepare.
  
  
• Part of Ford's early response was that they had repeatedly queried Firestone about tire safety and Firestone repeatedly failed to share information.
  
  
• What essentially happened is that as the tires flexed, particularly if they were underinflated or overheated, the tread would ultimately separate from the carcass and peel off. Drivers would lose control and in many instances because of the high center of gravity in an SUV, the vehicle would go off road and roll over, causing a number of serious injuries and deaths.

"The problem now," O'Rourke said, "is Congress wants to hold somebody accountable, and that means we haven't seen the last of it. Also the fact that there is a shortage of tires to replace the recalled tires is a complicating factor that has frustrated and outraged people."

Communications breakdowns, both internally and externally at Ford and Firestone, didn't help, O'Rourke added. The timeline that he reviewed showed various points where there should have been warning signs that something was wrong. In 1989, Ford hired an independent lab to test some Firestone models and problems began to surface in the testing. In 1996, the State of Arizona flagged tire safety issues and officially queried both the OEM and Ford. In 1998, State Farm, noting a pattern in policy holder claims, alerted the National Highway Traffic Safety Administration (NHTSA) about defects in the Firestone ATX brand. About the same time, the Firestone financial staff began to observe increased warranty claims but the company apparently didn't quickly respond to their findings.

Late in 1998, tread separations began occurring in Venezuela. Early in 1999, a Ford dealership in Saudi Arabia began replacing tires on Explorers. "For reasons best known to Ford," O'Rourke said, "there was no alert to NHTSA or to other U.S. authorities about this action." He went on to say, "This is a phenomenon known as information compartmentalization. Compartmentalize information, fail to share it, and you may create additional problems."

The problem, of course, erupted early this year. On February 7, Houston television station KHOU broadcast an investigative report that alerted the world, and particularly people who drive SUVs, with Firestone tires that there was a problem.

Ford immediately began its own investigation and shortly after NHTSA launched a formal inquiry into alleged tread separation on ATX and Wilderness tires. "Ford's investigation," O'Rourke said, "involved not only looking for patterns and problems but they were also looking for replacement tires. They were trying to deal with customer complaints and with their dealerships and others. There were a number of issues going for them."

By early August, Ford had identified what they thought was a conclusive pattern in certain tire models made in Firestone's Decatur, Illinois plant. Again there were complications. The majority of the suspect tires were made during a labor action, raising questions about the supervision of replacement labor and the inspection process during the final shipment phase.

On August 9, Firestone announced a three-tier region-by-region recall of 6.5 million tires, the majority of them mounted on Explorers and Ford light trucks. The recall was done in phases so there would be enough tires to make the replacements. But this infuriated Ford customers who were told they might have to wait up to six months to get replacements. It also upset Sears, a major retailer of Firestone tires, which announced it would no longer sell certain Firestone tires.

It became the lead story on the nightly news. "But as someone mentioned to me at the break," O'Rourke said, "you know a problem has become serious when it migrates from the nightly news to the Jay Leno and Letterman shows. You can only imagine what the experience must have been like for the PR folks at Firestone."

Using videotape segments, O'Rourke showed some of the news coverage including some of the apologies that both Firestone and Ford were issuing. Ford boss Jac Nasser and Firestone President John Lampe were thrust into the relentless limelight as spokespersons. During this time, O'Rourke said, "Firestone appeared to be going into a defensive crouch, not saying much publicly, while Ford was stepping forward because the accusations were beginning to point towards them." By mid-September, parent Bridgestone CEO Yoichiro Kaizaki became visible for the first time and declared that the Ford SUV design was at fault and that Bridgestone knew that the Firestone plant could not be brought up to Japanese standards.

Intense media coverage along with the Congressional hearings raised a multitude of questions. Why did the tires fail? Why did it take so long for a recall? Why did Ford and Firestone fail, at least publicly, to acknowledge the problem earlier? How long have they known about the design flaws?

The critical issue, of course, is the enormity of the problem: 400 injuries and 103 deaths by September (with more being reported in subsequent weeks). But in addition, it was apparent that "the companies have known the tires were defective long before they told anyone," O'Rourke said. "Also the Congress is now involved and that's never good from a manufacturer's point of view. The agency of record departed Firestone, leaving them without counsel. And both Ford's and Firestone's CEOs have become much more visible."

There was other fallout. Stock prices for both companies have gone down. Both brand names as well as sub-brands are in jeopardy, particularly those of Bridgestone/Firestone. In addition, consumer confidence in Firestone is near zero and both companies face class action litigation.

At this point, O'Rourke asked a panel of members what actions would they recommend that Ford and Firestone take. All came with special insights into the problem.

Barie Carmichael of Dow Corning, whose company went through the silicone implant recall a few years ago, said, "I guess the biggest lesson I've learned is that if you've seen one crisis, you haven't seen them all. In our case, we recalled the product permanently within two months of the crisis hitting. And we're still in crisis.

"In a situation like this," she continued, "you have to begin with an analysis of what you know, what you believe and what is the basis, the evidence for your position. That may sound simple, but in an oppositional crisis, the accusations and the terms of engagement keep changing."

Carmichael feels very strongly that you "don't argue your case exclusively through the news media. You have to communicate directly with your most important stakeholders, including consumers."

Finally, Carmichael said, "Don't let your critics shape your strategies. Stay anchored in your ethics and what you know, but make it easy to ask the tough questions."

Culp said Sears was pulled into the crisis because his company is the largest U.S. retailer of tires. "In our case, it's a clear example of failure to communicate. Our tire management team was unable to get responses from Firestone executives as to what their plans were. Meanwhile, our customers are coming into the store saying, 'I don't want these tires on my car, what are you going to do about it?' And we're saying to Firestone, 'What are you going to do about it?' Nothing was coming back, and it just continued to mount up, day after day."

Culp said his company finally had to devise a plan for announcing that Sears would stop selling the Firestone tires that were under investigation. Unfortunately, there was a communications breakdown on Sears' part and Firestone and Sears dealers were not notified of the sales embargo before word leaked out about their plans. As the media calls poured in, Culp said, "We realized we were in the middle of a major firestorm that we had created. We also created a problem for our store managers because now everyone was coming into our dealers with their Explorers saying, 'Take these tires off.'"

The third member of the panel, John Perduyn said his company, Goodyear, sympathizes with the difficult position that Firestone is in. "All tires may be subject to recall from time to time," he said, "but if you spot things early, you can handle them with a minimum of problems."

Acknowledging that Firestone's problem is an industry problem, Perduyn said the industry position is to handle the recall as quickly as possible "because there are a lot of vehicles still out there with potentially bad tires." All tire manufacturers are increasing production as fast as they can, but "it takes a long time to fill a 6.5 million tire gap."

Perduyn said, "We certainly would hate to see a condemnation of the entire industry because of this one situation. We produce a huge volume of tires and they are predominantly safe and can operate in some very difficult situations." But, he added, there needs to be an educational program that will increase awareness of tire safety considerations. "And I think we also have to have better standards. We haven't had a standard change since 1968, and we've been working with NHTSA on this. But because of budget cuts, they haven't been able to respond."

From a public relations standpoint, Culp thought the idea of an education program was good, particularly with so much media coverage now on the issue of tire safety. "We have an opportunity to inform consumers that they ought to pay more attention to their tires." As evidence of growing awareness on the part of consumers, Culp said that on the previous weekend alone, Sears sold 22,000 tire pressure gauges.

Perduyn said his company is working with the Rubber Manufacturers Association to point out to the public that they need to take care of their tires. They are a high-tech product, he said, even if they don't look that way. "I hope Bridgestone/Firestone will be part of this effort," he added.During discussion of the case, the audience agreed that it was a classic example of how not to handle a crisis. There was obviously a breakdown in communications with both companies as the situation deteriorated and afterwards when the finger-pointing escalated. But the most damning observation was that neither company seemed to have a crisis management policy in place that might have prevented the damage that resulted.