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Bridgestone, Ford Settle Tire Dispute

The parent of the Firestone brand will pay $240 million to the carmaker to cover some of the cost of the massive recall in 2000 and 2001.

October 13, 2005|Myron Levin | Times Staff Writer

Tire maker Bridgestone Corp. agreed to pay $240 million to Ford Motor Co. to settle a cost-sharing dispute over a massive tire recall five years ago.

The deal announced Wednesday involved the recall of nearly 20 million of Bridgestone's Firestone brand tires in one of the most highly publicized product safety scandals in history. At least 350 people were reported killed in the U.S. and abroad, and hundreds more were seriously injured when tire blowouts triggered rollover wrecks of Ford Explorer sport utility vehicles.

Ford put the blame on defective tires; Bridgestone said drivers could have steered the vehicles to safety but for their top- heavy design. Tokyo-based Bridgestone bought Firestone Tire & Rubber Co. in 1988.

"We have effectively settled all the disputes between the two companies," Ford spokesman Paul Wood said. The deal "reflects a compromise," said Chris Karbowiak, vice president of public affairs for Bridgestone Firestone Americas in Nashville.

Even so, the agreement appeared to leave Ford with most of the cost of replacing the tires.

In August 2000, when the wave of fatal wrecks became front-page news, Bridgestone Firestone announced a voluntary recall of 6.5 million ATX, ATX II and Wilderness AT tires at a cost to the company of about $440 million.

The following May, Ford unilaterally began to replace the remaining 13 million Wilderness AT tires that were original equipment on Explorers and other Ford light trucks, when the tire company refused to do so. At the time, Ford said it had lost confidence in Firestone, a longtime supplier. In retaliation, Firestone announced that it would sever business ties that had lasted nearly a century with the automaker.

Ford took a $2.1-billion charge for the estimated expense of the second tire recall. On Wednesday, Wood said the final cost was less, but he declined to give a figure.

Some Ford shareholders threatened to sue Bridgestone themselves if Ford directors failed to act. In an April 2004 letter to Ford Chief Executive William Clay Ford Jr., a lawyer for the shareholders warned that they were considering legal action to recover recall costs from the tire maker because Ford "has failed to take appropriate action to recoup these losses."

The lawyer, Tab Turner, who also has filed numerous product liability suits against Ford over vehicle accidents, said Ford representatives had asked him to "stand down, [because] we're having conversations with Firestone on this issue."

The settlement followed a lengthy mediation, Turner said Wednesday. "It was a little surprising to me that Ford settled it for as little as they got," he said.

Ford spokesman Wood said he didn't believe the threatened shareholder action "was much of a factor" in initiating talks.

Since the split between the companies, Ford units outside the U.S. have continued to use some Bridgestone tires. But Wood said Ford had no plans to resume putting Firestone tires on vehicles produced and sold in the U.S.

Analysts said the dispute with Bridgestone was not one of the major issues facing Ford, which is trying to recover from depressed earnings and slumping sales.

"It's a footnote," said David Healy, an analyst with Burnham Securities. "In the context of Ford having $20 billion in cash, on a balance sheet the $240 million is welcome, but it doesn't make much of a difference."

The Explorer has retained its rank as the top-selling SUV, although sales have dropped nearly 25% from a peak of 445,157 in 2000 to 339,333 last year. The Explorer was redesigned in 2002 with a wider track and a lower center of gravity to increase its stability.

Bridgestone's Firestone unit in July 2003 agreed to add safety features to millions of new light-truck tires as part of a settlement of a nationwide class- action suit. The deal required the company to equip tires with belt edge strips, which stretch like a tourniquet over a tire's steel belts to reduce the risk of blowouts from tread separation.

Ford shares fell to a 52-week low Wednesday of $8.61 before closing at $8.69, down 2 cents.

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