Originally created 04/29/01

Putting out the fires at Firestone



Corporate crisis managers have two very different ways of dealing with problems. One is to fess up and react quickly. The other is to ignore the problem and hope people forget about it.

Since Bridgestone/Firestone Inc.'s defective tires received mass-media attention last year, the company has been somewhere in between - gradually accepting at least partial responsibility for its products' failures.

The company, a subsidiary of Tokyo-based Bridgestone Corp., one of the world's largest tire and rubber makers, reported an 80-percent drop in profits last year because of special costs attributed to the recall of Firestone ATX, ATX II and Wilderness AT tires produced at specific locations.

The replacement of the 6.5 million tires is now estimated to be 98 percent complete, and sales appear to be on the rebound. Many of the replacement tires were produced at the company's 4-year-old Aiken plant, although none of the defective tires was made there.

Troy Keller, a co-owner of the independent Peach Orchard Firestone in Augusta, said sales at his store are fine.

"Pretty much when the news quit talking about it, (brand distrust) pretty much died down," Mr. Keller said.

He said he doesn't know how many new customers may have been lost, however, because "99 percent" of his business is from repeat customers.

Bridgestone/Firestone's authorized dealer store on Wrightsboro Road reported being "slammed" with customers last week. The factory store on Broad Street said its sales also have picked up during the past six months.

In October, the company's first American chief executive officer, John Lampe, was named. Mr. Lampe admitted in a September congressional hearing that his company "had made some bad tires and takes full responsibility for those."

The executive's hands-on attitude has proved persuasive with consumers, according to the company's internal research.

But Bridgestone/Firestone drew sharp criticism several months earlier for not acting quickly enough to resolve public concerns over the three Firestone models, which were attributed to an increasing number of accidents.

To date, 174 deaths and 700 injuries have been attributed to tread separation, most of which occurred while in use on Ford Explorers.

Some believe the company knew about the tire problems as early as 1991 or 1992, long before the voluntary recall in August, which followed a National Highway Traffic Safety Administration investigation.

Last year's recall was the tire industry's second-biggest, the first being the 1978 recall of the Firestone 500.

Bridgestone/Firestone believes it has gotten to the root of the problems. Partially to blame is its own processes, the company found.

BRIDGESTONE/FIRESTONE is in the midst of an extensive print and television advertising campaign called Making It Right.

The ad campaign, launched this month, will continue through November, according to Phil Pacsi, Bridgestone/Firestone's advertising coordinator.

"We'll do whatever it takes, however long it takes, to gain your trust," one ad says.

Aside from trying to evoke an emotional response, the ads promote the company's quality-control plan.

A quality-assurance group now reports directly to Mr. Lampe. The group is charged with implementing an "early warning" system to head off quality-control problems. The company also is trying to standardize its processes.

The company said the defective tires were mostly the product of inconsistent rubber-mixing at its Decatur, Ill., plant.

But will the campaign be the cure-all for the company's tarnished image?

Not everyone thinks so. They say regaining consumer trust is a long-term endeavor and that Bridgestone/Firestone may have waited too long to recapture lost customers.

"They should've been out there with some sort of advertising strategy within two months of the problem," said Britt Beemer, founder of America's Research Group, a marketing research firm based in Charleston, S.C.

He said Bridgestone/Firestone might have done irreparable harm to the Firestone name. He speculates Bridgestone Corp. may be quietly discussing shedding the Firestone brand.

"Our numbers say that Firestone has potentially lost 60 percent of its customers," he said. "Firestone may eventually evolve into some other brand."

Bridgestone/Firestone's Mr. Lampe has vowed there will be no change in the brand.

General Motors Corp. in February said it plans to switch from Firestone tires to Bridgestone tires on certain cars and trucks this summer. The No. 1 automaker said it doesn't plan to abandon the Firestone brand, however.

Regardless, this year has been designated as a "Bridgestone year," according to Bridgestone/Firestone spokeswoman Jill Bratina, meaning the company will be pumping up promotion of the parent company's brand. The decision was made before the recall, she said.

Results of a February poll by Harris Interactive and the Reputation Institute found Bridgestone/Firestone's reputation was lowest among the companies surveyed, even lower than cigarette-maker Philip Morris Cos.

FINANCIAL ANALYSTS are still undecided on Bridgestone Corp.'s prospects.

Salomon Smith Barney, for example, rates the company's stock as a neutral buy.

Bridgestone's stock value dropped drastically last summer after the recall was announced. The stock has rebounded slightly, but is still down more than 50 percent from its 52-week high.

Solomon Smith Barney analyst Tsunemi Tachinbana says the company faces a number of uncertainties, including the results of the NHTSA investigation in September and whether the $450 million it set aside to compensate accident victims will be sufficient.

Ms. Bratina said the company has earmarked $754 million for the recall effort and all associated liabilities. However, some analysts predict the figure will exceed $1 billion.

In reaction to profit loss and decreased demand, the company announced mass layoffs at plants in Tennessee, Oklahoma and Illinois. Employment and production at the Bridgestone/Firestone South Carolina plant near Aiken has remained largely unchanged.

Peak production was 24,000 tires per day during the recall; now the plant produces just over 20,000 tires per day, plant spokeswoman Mary McLaughlin said.

Plant Manager Steve Brooks said the state-of-the-art facility has never been the target of quality concerns.

Regardless, the Making It Right campaign plays several times a day on the plant's closed-circuit television system - just as a reminder.

Lloyd N. "Larry" Newman has a theory: Bridgestone/Firestone could have minimized the public-relations mess, perhaps even avoided it completely.

"This problem blew up because lawyers attacked somebody in the news media," he said.

Mr. Newman, president of the Columbia-based consulting firm Newman Partnership Ltd., was referring to investigative reporter Anna Werner. The reporter for television station KHOU in Houston did a series of articles in February 2000 focusing on tire problems in Texas - prompting the NHTSA investigation and subsequent tire recall.

Ms. Werner got a terse letter from Bridgestone/Firestone alleging she made "falsehoods and misrepresentations" about its Firestone products.

She said other media and federal regulators didn't begin scrutinizing the tires until after the station posted the threatening letter on its Web site.

"Other news media really didn't pick up on this story for a few months," Ms. Werner said. "There was a giant pause when we did our first stories. We don't know the specific reason for that."

Mr. Newman said he believes the tiremaker was trying to divert attention from it's own culpability by claiming the drivers did not keep tires properly inflated.

"The lawyers were going to save money by blaming (the tire accidents) on the victims," Mr. Newman said. "Most of the press in the country would have given momentary attention, but Bridgestone/Firestone made the mistake of attacking someone in the news media. The news media take care of their own."

He said Bridgestone/Firestone continues making public-relations mistakes, citing the company's new tiresafety.com Web site that allows consumers to request free tire gauges.

"They're at least acknowledging they have a problem," Mr. Newman said. "But by giving everyone a free air-pressure gauge, this is a very dramatic way of saying, `It wasn't our fault."'

MR. LAMPE HAS been likened to former Chrysler Chairman Lee Iacocca, said Mr. Pacsi, the Bridgestone/Firestone advertising coordinator.

"He has been very well received by the American public," Mr. Pacsi said.

He said Mr. Lampe's personality is a big reason for the turnaround in Firestone sales.

Bridgestone Corp. said its first-quarter earnings matched expectations. The company estimates 2001 sales will be at $156.6 billion.

"We're definitely seeing an increase in consumer confidence," Mr. Pacsi said.

He said the next phase of the Making It Right campaign will feature race-car drivers Mario and Michael Andretti. Ads are planned to run through November.

Both Mr. Newman and Mr. Beemer said what consumers need is substance. An America's Research Group study in October showed 64.9 percent of those surveyed believe Firestone executives continued to make defective tires despite knowing of problems.

Mr. Newman said he believes history will continue to repeat itself unless deep-rooted attitudes change.

"After its first round of tire problems (in 1978), certainly Firestone didn't say to itself, `How can we prevent this from happening again?' Or if they did so, the people with the institutional memory were gone."

Reach Eric Williamson at (706) 828-3904.