Risk & Compliance

Firestone’s Credibility

Will consumers revert to buying Firestone tires simply because someone famous is assuring them of their safety?
Michelle GabrielleDecember 20, 2000

Can Firestone bounce back from its current woes and restore its badly damaged credibility?

Risk management experts suggest that if the company accepts blame and fixes its current problems, there’s hope for the future. But it won’t be easy.

Since August, Firestone has been in the spotlight, recalling 6.5 million of its Firestone tires after many reports of catastrophic accidents, which mostly involved Ford cars that had Firestone tires.

The company emphasizes that the recall was a voluntary one, says Dave Dickson, a Firestone spokesperson. Firestone is confident that it can bounce back in spite of the odds against it.

“We are a very financially stable company,” says Dickson. “We will certainly gain back the trust of our customers.” Dickson explains that Firestone is moving as fast as it can to replace the recalled tires. To date, 5.5 million tires have been replaced in a four- month period, a feat Dickson that asserts is “phenomenal for an automotive recall.”

Still, many customers can’t escape focusing on the “phenomenal” fact that so man tires had to be recalled in the first place.

Further, Firestone is facing record losses, ongoing litigation, and has built up quite a poor image with American consumers. Bridgestone Corporation already projected that its U.S. unit would post a net loss of $500 million in 2000 and $200 million in 2001. In addition, the number of Firestone brand tires sold in the U.S. replacement market was down more than 40 percent last month from 1999 levels.

Moreover, the behavior of Bridgestone’s president and CEO, Yoichiro Kaizaki, once renowned for enhancing Firestone’s entire operations when he took over in 1991, suggests that Bridgestone will not be coming to Firestone’s rescue any time soon. Kaizaki has not made a public appearance since the announcement of the recall.

Leadership must come from John Lampe, Firestone’s new CEO, who said he wanted his first act “to be an apology to those who have suffered personal losses or who have had problems involving our products. The burden is on us to earn your trust all over again. But it will take more than words. It will only be through our actions that people will once again think well of Firestone.”

Lights. Camera. Action.

On December 11, Firestone announced a plan for a “major advertising campaign early next year” as a method to win back market share, an “action,” which is predicted to be a most challenging struggle.

The company did not divulge its budget for the campaign, according to an article in the December 11 Wall Street Journal. But Shu Ishibashi, president of Firestone’s U.S. consumer tires group, characterized it as a “significant investment.”

The investment, though, is on hold until Firestone can find a spokesperson to represent it throughout the campaign, such as a “celebrity or a race-car driver,” according to the Journal.

The question, however, is: Will consumers revert to buying Firestone tires simply because someone famous is assuring them of their safety? After all, people have died while using Firestone tires. One superstar may not do the trick.

Putting Out the Fire

To bounce back from a situation like Firestone’s, “a company has to persuade potential customers that it has fixed the problem, and the customers don’t have any reasons to worry,” says William Margrabe, The William Margrabe Group, a Pelham Manor, N.Y.- based risk management and financial- engineering company. “That requires diagnosing the problem, making operational changes to solve it and communicating skillfully,” as time progresses.

Travis Pascavis, a stock analyst at Chicago, Ill.-based Morningstar, says that in a situation such as Firestone’s, “it is an immense task to shifts the public’s view” toward believing that “your products are safe” and that the “company will not mislead” its customers in the future.”

The first thing to do, says Pascavis, is to ensure that Firestone’s products are safe. In recent months, Firestone has lost 40 percent of its market share. Before trying to regain what it had lost, “it needs to test and retest its tires and properly rate them and mark them.”

Firestone’s Dickson says the company “is still trying to find out why a limited number of tires experienced tread separation.” Currently, the company says it’s putting the tires through rigorous tests to determine their relationship with the vehicles they’re mounted on and how they respond to pressure, speed and other conditions.

Firestone is attributing the faulty tires to a “combination of tire and [Ford] vehicle design, tire manufacturing, and customer abuse,” The Wall Street Journal reported yesterday. Firestone’s conclusion, however, did not satisfy Ford, which questioned the thoroughness of Firestone’s investigation. And the NHTSA says “it will try to conclude its own review of the tires by March.”

Firestone, apparently, has a ways to go in establishing its credibility. As far as its advertising campaign is concerned, Pascavis suggests that the company should prioritize its actions. “Once Firestone is sure that it can deliver what the car manufacturers have asked for,” says Pascavis, “then it can advertise exactly why it’s so confident that its tires are okay. If they have instituted a quality-control system that seems reliable, the public may give the company the benefit of the doubt,” says Pascavis.

Pascavis warns that blaming other parties, as Firestone has blamed Ford, does not help a company restore its image with the public. You have to take responsibility for whatever happened, the analyst believes.

For example, Ford seems to have handled the situation pretty well “by saying that it sympathizes with its customers and that it did all it could,” says Pascavis. “Ford advertised that it went even farther than Firestone in certain foreign markets where customer complaints precipitated a recall by Ford, even though the tire company said the tires were okay,” an act that may have helped avoid greater negative publicity with its own customers.

But companies like Firestone have to concentrate on more than the public, says Ed Pouzar, a director and risk management consultant at New York City-based Deloitte & Touche. Pouzar says that an internal public relations campaign is just as important as an external one.

“Company morale must be sagging right now,” he says of Firestone, which is a Deloitte client. It is crucial that a company “keep employees advised of what is going on” and give them reason to “take pride in their work, as well as the company they work for.” A company should always be on top of its employee- training programs, monitoring the effectiveness of them overall and improving them as the need arises.

“If Firestone had been more proactive,” says Pouzar, the situation altogether could have been better. Pouzar recommends that all companies have a “contingency plan” for use in the case of emergencies.

For example, companies should establish a committee whose job will include “coming up with scenarios on what type of disaster could occur with their products and then devising a game plan strategy” to prevent or repair it. This way, adds Pouzar, if a disaster does occur, a plan will have already been designed “to help minimize financial and operational loss, as well as some of the intangible assets, such as your reputation.”

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