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& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | SEPTEMBER 15, 2000 MANAGEMENT Firestone Dealers: In the Middle of the Firestorm They're working harder, awaiting reimbursements -- and trying to counter customer fears
His waiting list of drivers needing replacement tires is long and growing longer, and he expects to be dealing with the recall well into next year. "It's making a lot of extra work," Lilly says. He'd like to add to his four-person tire crew but doesn't have time to train new employees. Nationwide, most dealers have exhausted their supply, across all brands, of the tire size in question (15 inches), identified as P235/75R/15. Most manufacturers are boosting production to replenish those supplies. Nearly one-third of the 6.5 million tires covered by the recall had been replaced as of Sept. 12, a Firestone spokeswoman says. RUNNING HARD. The recall covers Firestone tires used on Ford trucks and sport-utility vehicles, especially the Explorer, which have been linked to more than 100 deaths in the U.S. and Venezuela. Ford is under fire for having recommended that the tires be underinflated, which critics have called an attempt to lower the risk of rollovers in SUVs. No matter who's at fault, the local tire dealer is on the front lines right now. If he carries mainly Firestone tires, he's running hard to stay in place. If he sells mostly other brands, the extra work means extra profits. When a dealer replaces the recalled tires with Firestone tires of a different model, the manufacturer reimburses him for the wholesale price of the tires, plus $20 each to cover mounting and balancing, taking back the recalled tire, and the extra paperwork involved. When non-Firestone brands are used to replace the recalled tire, Firestone reimburses the driver up to $100 per tire, which gives the dealer his usual profit margin. CASH-FLOW WORRIES. Authorized Firestone dealers carry at least 75% Firestone tires in exchange for a wholesale price break and marketing support. Now, some of those dealers are worried about cash flow as they deplete their inventories and await reimbursement, generally in the form of a manufacturer's credit on future purchases, says Dick Nordness, executive director of the Northwest Tire Dealers Assn., representing about 500 businesses. "Those who handle Firestone are being deluged more than others." But Firestone won't let a dealer run into financial hardship over the recall, says Susan Sizemore, public relations manager for Bridgestone/Firestone in Nashville, the U.S. branch of Bridgestone Corp. of Japan. So far, Lilly has put $50,000 worth of tires on customers' cars and is confident he'll be reimbursed eventually. "The little guys -- we'll get through it," he says. "It's just a lot of work." And it's a lot of opportunity for one of his competitors, Tim Borges at Ken's Tire Center in Lake Tahoe, who sells many brands of tires. "It's not bad for business. It gives us a chance to service existing customers and to get some new customers," Borges says. At 6,500 feet above sea level, Lake Tahoe is four-wheel-drive territory. Borges would like to have all the Explorer owners on his waiting list taken care of before the first snowfall, generally in early November. But he doubts he'll have enough tires in time. BREEDING CYNICISM. Firestone's most optimistic estimate for completing the recall is the end of the year, Sizemore says, depending on how fast manufacturers can turn out replacement tires. In the short term, the recall is good for Nu-Tread Tire in Boston, where business is up 20%, according to owner Bob Katz. In the long term, the recall isn't good for anybody who sells car parts or repairs, says Katz, who's also president of the New England Tire & Service Assn., which has about 250 members. "All aspects of the automotive aftermarket will be viewed with more scrutiny. A lot of people are already very cynical about our business." Dealers are quick to point out that they don't think the recalled tires are inherently defective. They think underinflation -- Ford's recommendation that the tires be inflated with 26 pounds of air pressure rather than 35 pounds, as Firestone recommends -- was a factor in the fatal accidents. "Nobody in their right mind puts 26 pounds in an SUV," Borges says. "You can't underinflate a tire and hope it holds up." Katz drives a Ford Explorer. "I always put more air in, because I knew better," he says. When the Firestone tires that came on his Explorer wore out years ago, through regular use, he replaced them with Cooper tires, a brand he has long preferred. BLAME GAME. In addition to pointing the finger at Ford, some dealers reserve part of the blame for drivers, who, they say, rarely check their air pressure, rarely have their tires rotated, and regularly exceed the speed limit. Underinflation and high speeds both increase a tire's heat, and tires that aren't rotated wear unevenly. The dealers also partly blame the media for their troubles. "Every single day there's articles," Katz says. "It sells newspapers. It sells airtime. It has caused a lot of commotion." Says Lilly: "The media has the customer so scared, they're afraid to drive on these tires." Although Lilly has replaced more than a thousand of the recalled tires, he says, he "hasn't seen a bad one yet." Nordness reports that of the thousands of tires his association's dealers have replaced during the recall, only one dealer reported seeing a defective tire. "A lot of times, customers aren't listening to the full story," Nordness says. "I've heard stories of frantic customers coming in and insisting that the tires be replaced right away. A lot of times, they aren't even the recalled tires." And it may get worse. On Sept. 12, Bridgestone/Firestone announced that it would provide free inspections -- at company-owned stores and authorized dealers -- of two dozen more types of tires, based on recommendations by the National Highway Traffic Safety Administration.  By Theresa Forsman in New York Edited by Robin J. Phillips  | | |
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