An analysis of the Ford- Firestone Case

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An analysis of the Ford- Firestone Case

  1. 1. COMM351 Essay Danial Munsoor 3259882 Executive SummaryFord-Firestone case is a unique and an appropriate example of violation ofbusiness ethics by two renowned corporations, Ford Motor Company andFirestone Tire Company, each of which was the manufacturer of a “different”product. This essay talks about as to how the leading car manufacturer Ford, canbe held morally accountable for the various accidents and deaths which occurredin US due to vehicle rollovers of its popular SUV known as the “Ford Explorer”.However, Ford executives some how managed to put most of the blame onFirestone by saying that the accidents and deaths occurred mainly due to tireblowouts, and therefore “it is a Firestone tire problem and not a vehicle problem”.On the other hand Firestone claimed that many of the accidents were mainly dueto the vehicle’s lack of stability and were not due to its tires. Indeed much of theessay is about opposing statements made by the executives of Ford andFirestone. Therefore, in order to have a better understanding of the case, it isimportant to understand the difference between when an item is a “product in itsown right” and when it is a “component of another product”. When thousands ofparts came into a Ford assembly plant, Firestone tires were also like those othercomponents that were acquired by Ford. Therefore it can be presumed that thetires were manufactured in a manner to suit the Ford specifications, and they didbecome a part of the assembly process. At the time of assembly Ford shouldhave checked that whether the tires had the same high quality as othercomponents. Even according to the Utilitarian Approach, the manufacturer of theproduct should be held responsible for the defects rather than the retailer, and itis the duty of every producer to ensure that it produces the safest productspossible. Therefore based on the Utilitarian Approach, it can be concluded thatFord was “unethical” because it was controlling the process through whichExplorer was produced, and therefore it is to be held morally as well as legallyresponsible for the defects which were present in the vehicle. 1
  2. 2. COMM351 Essay Danial Munsoor 3259882 Corporate Responsibility, Ethical Blunders and Rollovers: An analysis of the Ford- Firestone CaseINTRODUCTION:Ethics is a term that describes a whole set of values around how to behavemorally, and treat people in ways that show respect for them. On the other handBusiness Ethics can be defined as moral principles and values that governdecision and actions of a company. In the most basic terms, the definition ofbusiness ethics comes down to one thing, i.e. distinguishing between right andwrong and opting to do what is right (White, 2008). Ford-Firestone case is a“unique” and an “appropriate example” of violation of business ethics by twofamous corporations, Ford Motor Company and Firestone, each of which was themanufacturer of a “different” product.ABOUT FORD:Henry Ford founded The Ford Motor Company in 1903 in Dearborn, Michigan.When the company began it used to produce few cars a day, with only two orthree men working on each car. Ford revolutionized the car making industry andmanufacturing by becoming the first one to use an assembly line technique toproduce cars (Frontenac Motor Company, 2009). It is one of the largest family-controlled organizations in the world and has been under family control for morethan hundred years. It is the best truck maker in the world and comes secondafter General Motors in car manufacturing. Ford manufactures various forms ofcars and light trucks. With a staff of 360,000 employees, Ford had revenues ofmore than $160 billion in 1999 (Rourke, 2001).ABOUT FIRESTONE:The Firestone Tire & Rubber Company was established by Harvey S. Firestonein 1900 in Akron, Ohio. The company began with only 12 employees, and it usedto supply rubber tires for wagons and buggies. It was a leader in the massproduction of tires. As years passed, Firestone realized that it had also had the 2
  3. 3. COMM351 Essay Danial Munsoor 3259882capability for manufacturing tires for automobiles. Therefore in 1990, it mergedwith Bridgestone Corporation of Japan to become Bridgestone/Firestone Inc.After the merger, the company went on to become a pioneer in tire technology. Itdeveloped more than 8,000 different types of tires for vehicles ranging frompassengers to agricultural equipment to race cars. In 1999 the company hadrevenues of more than $20 billion (Rourke, 2001).THE COMPANIES INVOLVED:Ford Motor Company and Firestone was a partnership between the two industrygiants, Henry Ford and Harvey Firestone. This partnership began in 1908 whenHarvey Firestone supplied Henry ford with tires for his new Model T. Due tofriendships among the members of the two families, the business relationshipgrew stronger (Noggle and Palmer, 2005). However, both the companies wereunaware that their century-long relationship would end in such a tragic way. Andit was in the year 2001 when both the companies announced that they will notenter into new contracts with each other anymore (Noggle and Palmer, 2005).WHO IS TO BE BLAMED?In this essay, we will observe how the pioneer car manufacturer Ford, can beheld “morally accountable” for the various accidents and deaths whichoccurred in US due to vehicle rollovers of its popular SUV known as the “FordExplorer”. According to a report, there were 700 injuries and 203 deaths due tothe Ford-Firestone product failures (Hoyer, 2001). Studies show that Explorer’slack of stability was mainly due to lower recommended psi and also due to themodifications which were made to the Firestone ATX and Wilderness tires(Rowell, 2008). However, Ford executives some how managed to put most ofthe blame on Firestone by saying that the accidents and deaths occurred mainlydue to tire blowouts, and therefore “it is not a vehicle problem and is a Firestoneproblem”. On the other hand Firestone argued that many of the accidents weremainly due to the vehicle’s “lack of stability” and were not due to its tires. Indeedmuch of the essay is about opposing statements made by the executives of 3
  4. 4. COMM351 Essay Danial Munsoor 3259882Firestone and Ford. In other words, it was uncertain as to which product causedthe accidents and therefore which company should be held accountable.Therefore, in order to have a better understanding of the case, we need tounderstand the difference between when an item is “a separate product” andwhen it is a “part of another product” (Noggle and Palmer, 2005).AN ANALYSIS OF TIRE CRISIS:Back in the mid 80s, Ford started working on one of its most popular SUVsknown as “Ford Explorer”, which was a replacement for the smaller SUV knownas the “Bronco II”. In May 1987, when a test (code named UN46) was done onthe Explorer prototype, it indicated that the stability of the prototype was worsethan Bronco II. According to a Ford internal memo, the optimal way to overcomethe stability issue was by lowering the center of gravity, widening the Explorer’swheel base, and using a smaller P215 tire. However, when further analysis wasdone, Ford realized that expanding the wheel base and lowering the center ofgravity would have delayed the production, and hence it decided to act“unethically” (Rowell, 2008). Therefore a month later in June 1987, anothermemo was passed by Ford which approved the use of Firestone P235 ATX (nota smaller tire) tires on the vehicle. In 1988, when a computerized test was doneon the ATX tires, it indicated “stability issues” at 35psi, but favorable results wereexpected at 26 psi. Hence in order to “partially” resolve the stability issue, Fordengineers offered a ‘back up plan’ and that was to set an inflation pressure to 26psi (Noggle and Palmer, 2005). Moreover, an internal Ford test report publishedon 25th November 1988 showed that Explorer was also lifting two wheels at aspeed of 55 mph due to a high center of gravity and front suspension system(Rowell, 2008).The P235 ATX tires were designed by Firestone specifically for this vehicle.Despite of knowing the safety margin of 25-35 psi for the P235 ATX tires, inJanuary, 1989 Ford Motor Company went on to set the inflation pressure to 26psi. Basically inflation pressure decides how inflexible the tire is: the lower the 4
  5. 5. COMM351 Essay Danial Munsoor 3259882pressure, the more the flexing around the sidewalls (Noggle and Palmer, 2005).The more the flexing, the greater the friction which results in greater heat beingproduced and excessive heat deteriorates a tire’s performance, and this canresult in a “tire blowout”. As far as the ability of the tires to withstand heat isconcerned, it depends on the whether the tire is A rated, B rated or C rated. If thetire is A rated, it means that it can withstand the excessive heat the most.However if the tire is C rated then it can not withstand the heat at all. As far as Brated tires are concerned, they fall in between the A and C rating category. Firstlyby setting a low inflation pressure and secondly by selecting C-rated tires, Fordselected tires which were not heat resistant and could be expected to generateexcessive amount of heat (Noggle and Palmer, 2005). Another factor, apart fromthe inflation pressure, that contributed to the tire damage was the excessive loadof the vehicle. Due to the large size of the explorer, the recommended pay loadwas 750 – 1310 lbs. The pay load was such that it would have increased withseveral passengers and cargo load, and this would have put even more burdenon the tires (Noggle and Palmer, 2005).On 11th January, 1989 a meeting was held with Firestone regarding “jacking” (i.e.lifting) the front suspension. As far as jacking the suspension was concerned, itwas not relevant from the stability point of view (Rowell, 2008). As mentionedbefore, lowering the center of gravity could have resolved the stability issue to agreat extent, but Ford was unwilling to do so because then the production wouldhave been “delayed”. Therefore on 26th January 1989 Ford engineers stated thatP235 ATX tires were not of a higher quality and they have not met its stabilitygoal (Noggle and Palmer, 2005). Thus Ford decided to use a new set ofFirestone tires known as the P245 ATX tires.The use of P245 ATX tires proved to be even worse. On 9th February, 1989 Fordhired Arvin/Calspan Company to test the P245 tires. According to the test report,there was a severe tread package separation from the tire carcass at 29 psi ofpressure. However, in an internal memo to Ford, Firestone did agree to the test 5
  6. 6. COMM351 Essay Danial Munsoor 3259882report and admitted that the tire showed a sever tread separation. But Firestoneassured Ford that the tread separation won’t be much of a real problem (Rowell,2008).Firestone’s guarantee was good enough for Ford to continue with its decision touse Firestone tires and to set the pressure to 26 psi. In addition to setting up theinflation pressure, Ford officials also rejected some alternatives which could haveimproved the stability of Explorer because they wanted to meet the productiondeadline. It was in March 1990, that the first Ford Explorer was launched in theAmerican market. And on 12th February 1991, the “first” tread separation casewas filed against Ford and Firestone. However, both companies were unaware ofthe worse problems which were to come. Soon after the first Explorers wereintroduced in the market, tests showed that Explorer had a poor fuel economy.This was however due to the “lower inflation pressure” which was adopted todeal with the vehicle’s stability problems (Noggle and Palmer, 2005). Therefore,in order to improve the fuel economy of the 1995 model, Ford went against itsengineers and decided to reduce the “rolling resistance” by making the tireslighter. As directed by Ford, in the year 1994 Firestone decreased the weight ofthe tires by 10%. However, the weight was reduced by making variousmodifications to the tire, such as removing material etc (Rowell, 2008).After the weight of the Firestone tires was reduced, the number of accidents withthe Firestone-Explorer grew “rapidly”. The accidents mainly occurred when thetire’s tread literally separated from the tire’s body, which caused the explorer tobecome incontrollable and rollover-frequently which led to deadly accidents(Noggle and Palmer, 2005). In the process, both Ford and Firestone were suedby the victims. For sometime, many of the Explorer-Firestone ATX problems didnot come to public attention. And it was in 1998, that the State Farm InsuranceCompany reported 21 Firestone tire failures to National Highway Traffic SafetyAdministration (NHTSA). This issue gave NHSTA a reason to investigate into thematter. According to NHTSA, there were 14 Ford-Firestone cases already 6
  7. 7. COMM351 Essay Danial Munsoor 3259882reported between1991 and 1995. However, NHTSA did not formally commenceits investigation until May 2000 (Noggle and Palmer, 2005). While NHTSA wasplanning to investigate into the matter, Ford started to replace tires in SaudiArabia and in Venezuela, after it came across the similar patterns of accidents.Ford was lucky that NHTSA was not authorized to request recall information fromoverseas countries (Noggle and Palmer, 2005).THE FIRESTONE TIRE RECALL:On 9th August, 2000 Firestone executives voluntarily “recalled” approximately 6.5million tires. The recall was the second largest tire recall in the History of U.S.The recall campaign included several Firestone tires like P235, ATX, ATX II andWilderness AT, many of which were installed on the Ford Explorer (Noggle andPalmer, 2005). According to a research the estimated tire replacement costswere around $350 million. And if the fines and compensation charges wereincluded in the total costs to be shared by Ford and Firestone, the amount wouldadd up to approximately $1 billion. Moreover, when Ford was committed to therecall, it was “very slow” in approaching the public and the media (Verschoor,2000).A COUNTRYWIDE SCANDAL UNCOVERED:At that time, the complete proof of what caused the accidents was yet to bediscovered. However, studies suggest that there were numerous factors thatcaused the deadly accidents. According to tire experts there were possibledesign flaws which were due to poor materials and processes used in theirproduction. Moreover there were possible manufacturing irregularities at theIllinois Firestone plant which produced most of the defected tires. Regardless ofwhatever the weaknesses or flaws were there, it was almost clear that thestability problems in the Ford Explorer were the “main” reason for the deadlyaccidents (Noggle and Palmer, 2005). Further discoveries reveal that, despite ofrecognizing the risks to the consumers, Ford deliberately decided not to stick toits own design goals (i.e. expanding the wheel base and/or lowering the center of 7
  8. 8. COMM351 Essay Danial Munsoor 3259882gravity) so as to save money (Rowell, 2008). According to NHTSA’s databasethere were 3500 reports on tire failures, 13% were of Ford Explorers rollover dueto tire failure compared to 3% for all other SUV’s and light trucks (Noggle andPalmer, 2005).FORD AND FIRESTONE REACT:As the number of accidents grew and the public got to know of the problemsassociated with Firestone equipped Explorers, Ford and Firestone responded byblaming each other. Masatoshi Ono, the CEO of Firestone completely deniedthat the tires were defective or that the company was responsible for theaccidents. However, Firestone tried to put the blame on Ford for recommendinga very low inflation pressure, and it also stressed on the poor tire maintenance bycustomers. On the other hand, Ford’s CEO at that time, Jacques Nasser,portrayed from the starting that the problem was mainly due to Firestone’s tires.He forcefully declared that the accidents were not due to the auto-maker bystating that “this is a Firestone tire issue, not a vehicle issue” (Noggle andPalmer, 2005). However, this statement of Nasser’s proved to be the turningpoint and thus requires closer examination.FORD’S CEO MAKES THE WRONG STATEMENT:Nasser’s statement that “it’s a tire problem and not a vehicle problem” portrayedthat the Firestone ATX tires were a distinct product and not a component of theFord Explorers. It’s like saying that “brake problem is not a vehicle problem”since a brake problem is very much a vehicle problem. It is important to considerthe fact that Ford went ahead than just simply selling Firestone ATX tires. Itforcefully modified the specifications that Firestone originally used in designingthe tires. Moreover it also determined the air pressure which was at the lowerend of the safety margin (Noggle and Palmer, 2005). 8
  9. 9. COMM351 Essay Danial Munsoor 3259882MANUFACTURER OR SELLER: THE MORAL DIMENSIONBy nature, we are likely to place greater “moral responsibility” for the faults ina product on its manufacturer (often called assembler) rather than on its seller.However this perception is the key to understanding moral responsibility (Noggleand Palmer, 2005).A Utilitarian approach to moral responsibility requires placing moralresponsibility where it will do the greatest good. Generally it means locatingresponsibility at that point from where the significant effects of harmful behaviorcan be reduced without harming the society. According to the utilitarianapproach, the manufacturer of the product should be held responsible for thedefects rather than the retailer. Therefore it is the duty of every producer toensure that it delivers the safest products (Noggle and Palmer, 2005). Based onthe Utilitarian approach, it can be said that Ford was “unethical” because it wascontrolling the process through which Explorer was produced, and therefore it isto be held morally as well as legally responsible for the defects which werepresent in the vehicleThe “legal issue” in this Firestone-Ford controversy is so tightly linked that it isimpossible to discuss one without discussing the other. Without doubt it is thelegal liability of the manufacturer of the product that comprises of variouscomponents manufactured by other companies. Even if the component made bythe part maker contains a defect, the manufacturer of the product can be heldpartially responsible if the accidents occur due to that defected part because thecomponent is a part of the product. As far as the legal liability is concerned, Fordwas legally responsible for the tragic accidents which took place due to tireblowouts (Noggle and Palmer, 2005).MORAL AND LEGAL RESPONSIBILITY FOR COMPONENT PARTS:Perhaps the determination of Ford’s moral and legal responsibility depends partlyon whether the tires were seen a separate product “bundled” with Explorer or as 9
  10. 10. COMM351 Essay Danial Munsoor 3259882a part of the vehicle. If the former is considered then Ford only transferred thehazard from one buyer to another. However if the latter is considered then Ford,as a manufacturer of the Explorer which includes the tires, not only transferredbut also helped in producing the hazard (Noggle and Palmer, 2005).FORD IS RESPONSIBLE AND NOT FIRESTONE: A DEEPER ANALYSISWhen thousands of parts came into a Ford assembly plant, Firestone tires werealso like those other components that were acquired by Ford. Therefore it can bepresumed that the tires were manufactured in a manner to suit the Fordspecifications, and they did become a part of the assembly process. Actually tiresare the same as gas tank, air bags, brakes, steering and windshield. At the timeof assembly Ford should have checked that whether the tires were of the samehigh quality as other components. However, the only difference between the tiresand other components was that the tires were covered up under a warrantywhich was provided by Firestone and not Ford (Hoyer, 2001).BMW REACTS IMMIDIATELY AS COMPARED TO FORD:Comparing Ford with the German automaker BMW AG, BMW “immediately”recalled 200,000 of its cars, after getting to know that there was a problem withthe front passenger seat airbags. According to NHTSA, the recall campaigncovers 2004-2006 5 Series, 2004-2006 X3 and 2006 3 series (Tutor, 2008).Apparently the problem was that small cracks used to develop in the seatdetection mat which used to deactivate the front passenger air bags. However, ifthe seat detection mat fails to sense a person, it deactivates the airbags. A BMWspokesperson Tom Plucinsky further mentioned that due to small cracks the airbag light used to indicate a deactivated air bag even if the passenger was sitting.BMW responded to the problem by firstly extending the warranty to 10 years forthe above mentioned vehicles without any mileage limit. And secondly it replacedthe detection mats for the customer free of charge (Raia, 2008). By performingthis ethical act, BMW prevented disastrous accidents from taking place. 10
  11. 11. COMM351 Essay Danial Munsoor 3259882CONCLUSION:In conclusion, Ford is the one to be blamed for the accidents because it did notadopt proper measures to address the stability problems which were associatedto the Ford Explorer. Instead of taking the moral and legal responsibility to fix theproblem, it just pointed out fingers. 11
  12. 12. COMM351 Essay Danial Munsoor 3259882REFERENCES:Frontenac. (2009), ‘The Model T Ford’, Frontenac, Available:http://www.modelt.ca/background.html [Accessed 28 October, 2009].Hoyer, R. (2001), ‘Why quality gets an F’ , Proquest, Available:http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=3&did=83789090&SrchMode=2&sid=35&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257632310&clientId=20901 [Accessed 17 October, 2009].Raia, J. (2008), ‘BMW Recalls 200,000 Cars With Potential Air Bag Problems’,The weekly driver’, Available:http://www.theweeklydriver.com/articles/1280/1/BMW-Recalls-200000-Cars-With-Potential-Air-Bag-Problems/Page1.html [Accessed 20 October, 2009]Robert Noggle, & Daniel E. Palmer. (2005), ‘Radials, Rollovers andResponsibility: An Examination of the Ford-Firestone Case’, Journal of BusinessEthics, [online], Volume 2, No. 56. Available:http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=0&did=796936741&SrchMode=2&sid=35&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257632310&clientId=20901, [Accessed 25 October, 2009].Rowell, J. (n.d), ‘The ford explorer: History repeats itself’, Cdrb, Available:http://www.cdrb-law.com/legal-articles/ford-explorer-history-repeats-itself-john-d-rowell.pdf [Accessed 24 October, 2009].Tutor, C. (2008), ‘BMW recalls 200,000 vehicles over issue with front passengerair bag’, Autoblog, Available: http://www.autoblog.com/2008/08/13/bmw-recalls-200-000-vehicles-over-issue-with-front-passenger-air/ [Accessed 28 October,2009].Verschoor, C. (2000), ‘Legal compliance and ethical blunders at Ford/Firestone’,Proquest, Vol.82, pp22, Available: 12
  13. 13. COMM351 Essay Danial Munsoor 3259882http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=5&did=62518256&SrchMode=2&sid=35&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257632310&clientId=20901 [Accessed 3 November, 2009]White, M. (2008), ‘A definition for business ethics’, Business, Available:http://business.lovetoknow.com/wiki/A_Definition_for_Business_Ethics[Accessed 1 November, 2009]. 13

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