Already a Bloomberg.com user?
Sign in with the same account.
Lessons from the Tire Fiasco
The biggest product recall since Tylenol is spiraling into a fiasco for all involved--Ford Motor Co., Firestone Corp., regulators, Congress, even the U.S. judiciary system. Everyone is blaming someone else, no one can yet explain the true cause of the tire problem, and the reported death toll keeps rising around the world. Enough. The lesson of what may be the first global product recall is that the mechanisms for ensuring consumer safety need fixing.
We'd start with the National Highway Traffic Safety Administration. It doesn't even gather information on foreign auto-related accidents or recalls. Had it done so, it might have ascertained trends in defective Firestone tires on Ford Explorers in Venezuela beginning in October, 1998. Even earlier--July, 1998--State Farm Mutual Automobile Insurance Co. says it noticed a pattern of problems with Firestone ATX and Wilderness tires in the U.S. and e-mailed the NHTSA. But the agency took no action. It started scrambling to get a handle on the problem only four months ago.
Congress shares much of the blame for this regulatory failure, even as it holds hearings to lambaste the NHTSA. Congress has consistently starved auto-safety regulators for the past 20 years and has terrorized NHTSA into becoming cautious about launching recalls. In battling too much government regulation, Congress refused time and again to grant the NHTSA money and authority, often under heavy lobbying pressure from Detroit.
Firestone, for its part, has resisted this recall every inch of the way. It first blamed Ford for the problem, saying the auto company told consumers to underinflate tires to make the ride on the Explorer softer. Then it denied knowing about the tread problems that showed up in the U.S., Venezuela, and elsewhere years ago. Bridgestone, Firestone's parent, has behaved much like Mitsubishi Motors Corp. and other Japanese corporations by publicly denying product problems and customer complaints while trying quietly to solve the trouble.
Ford has questions to answer as well. It certainly knew of tire problems overseas on its Explorers well before NHTSA launched the recall in May. A Mar. 12, 1999, internal memo shows that Ford itself replaced thousands of faulty Firestone tires on its Explorers in Saudi Arabia and did not notify U.S. safety regulators about what was, in effect, a private recall of tires also sold in the U.S. Ford designed the Explorer off of an older Bronco truck chasis said to have roll-over problems. Did Ford recommend a lower tire pressure (against the advice of Firestone) just to give customers a soft, smooth ride, or did it also want to stabilize the Explorer and curb rollover? Nothing less than the credibility of Ford's brand is at stake in the answer.
The credibility of the U.S. judiciary is also at risk. The first of 60 personal-injury lawsuits filed against Firestone because of its Explorer tires dates back to 1992. But the NHTSA and the public never heard of any of them because Ford and Firestone aggressively sought, and were granted by judges, the right to seal evidence and testimony. Plaintiffs' lawyers willingly agreed to the secrecy in exchange for the compensation and fees. Public safety was sacrificed.
It is clear what must be done. Firestone and Ford owe it to their customers to reveal what they know about the tire failures and when they first knew it. The courts should bar secrecy in product-liability proceedings. The NHTSA must start collecting safety data from around the world, and Congress should provide the resources for it to act in a global marketplace. Too much regulation can stifle economic growth. Too little regulation can kill people.