Made in China: Faulty Tires

(page 2 of 2)

Richard Kuskin

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But his engineer, an industry veteran, was suspicious that the tires weren't being made properly. And after the May, 2006, accident in New Mexico, Foreign Tire started asking pointed questions of its Chinese supplier. Eiber wanted to know if Hangzhou Zhongce was using a 0.6-millimeter gum strip—it prevents a tire's steel belts from separating from the rubber—in every unit. Kuskin says the company told Foreign Tire that the tires were fine. But when Eiber took apart the tires from the New Mexico ambulance company, he found no gum strips. Foreign Tire pressed Hangzhou Zhongce about the missing strips, but says its executives responded that the tires were not a problem.

Ignored Concerns

It was time for a face-to-face meeting. Kuskin, Eiber, and the FTS's attorney flew to Hangzhou in September, 2006. Over three days of meetings, Kuskin says, they talked about problems with the tires, the possibility of a recall, and asked for documented test results that would prove the tires were safe. Then Kuskin says he pressed the Chinese to take responsibility for the recall and replace the defective tires. They listened, he says, but were noncommital.

The trip did unearth one revelation, Kuskin says. Hangzhou Zhongce told him that its chief engineer had decided to stop using the gum strips, which the company has since confirmed. Apparently the man didn't understand the significance of the technology, Kuskin says. "There is one engineer responsible for this whole mess," he adds. "That's the guy I am absolutely furious with."

Over the next few months, Foreign Tire says it sent six e-mails to Hangzhou Zhongce asking for information on the tires and help with a recall. On May 30, Kuskin wrote: "Problems do not go away because they are ignored. We notified you of two quite severe problems. I have heard nothing or very little on these subjects." Hangzhou Zhongce, says Kuskin, never directly responded to his questions. Nor, he says, would it say which tires lacked gum strips so FTS could recall them.

FTS decided to do more testing. It asked a tire distributor in Maine in early January of this year to find a few Hangzhou Zhongce-produced tires that were made in 2005. It took the Maine firm six weeks to find the tires and ship them. Kuskin sent the tires to Texas for another endurance test. After 20,000 miles, the tires failed. Kuskin got the test results on May 10.

"Not Acceptable"

A few days earlier, Foreign Tire was sued over a fatal wreck that had occurred in August, 2006. A van using FTS tires crashed on the Pennsylvania Turnpike. Two people were killed and another has serious brain damage. "It wasn't a good day for me," says Kuskin. On June 11, Foreign Tire alerted NHTSA about all of its findings and the government ordered a recall. NHTSA sent the importer a letter on June 26 saying the company's inability to afford the recall, which Kuskin estimates will cost $90 million, is "not acceptable." For its part, Hangzhou Zhongce says the tires aren't defective and questions whether a recall is even necessary. Attorneys for the Chinese firm met with NHTSA on July 11 and asked for a chance to prove that its tires are safe, says a person familiar with the meeting. The company also says incorrectly sized tires may have played a role in the fatal accident.

Meanwhile, the attorney representing the victims of the Pennsylvania crash is gearing up for a major legal battle. Jeffrey B. Killino, who works for the law firm Woloshin & Killino in Philadelphia, plans to make the case that Foreign Tire waited too long to issue a recall. "I'm going to build a case that they should be criminally indicted," he says. "It was my case that prompted the recall." Kuskin denies he waited too long to alert NHTSA and says his tires not only meet government standards but also that his firm volunteered that the tires failed its own more stringent tests.

As he ponders his future, Kuskin says he is trying to apply the lessons he has learned from his experience. "We didn't have a formal schedule" to test tires, he says, but now the company tests one a month. Kuskin also plans to write new contracts that would obligate Chinese manufacturers to help pay for future recalls and ensure that disputes are settled in Hong Kong, where the legal system is more sophisticated than China's.

As he takes out ads in newspapers urging consumers to turn in their recalled tires, Kuskin harbors hopes of making his Chinese partner pay. He says he has had "reasonable conversations" with the U.S. law firm recently retained by Hangzhou Zhongce. "We intend to be made whole by Hangzhou," he says.

Welch is BusinessWeek's Detroit bureau chief. With Lorraine Woellert and John Carey.