20 May coporate social responsibility
Case Study: The Ford-Firestone Brand [Chapter 10, Case 10.3, pp. 240-243]
Read the case study as presented, and address the following.
1. Summarize the case and describe the participants.
2. Describe how this case relates to ethics in marketing, advertising, and product safety.
3. Expose the challenges of privacy in the cotemporary organization.
4. Describe this case study from the perspective of corporate social responsibility.
5. Describe this case study from the perspective or international business.
6. Explain the responsibilities of the board of director in companies like Starbucks.
7. Describe the role of the Sarbanes-Oxley Act in the way companies present their financial information.
8. Submit the paper following APA standards.
9. Use a minimum of two references from business ethics journals.
Use the traditional introduction, body, and conclusion outline.
CASE 10.3 The Ford–Firestone Brawl
For almost 100 years, Firestone Tire and Rubber Company had supplied tires to Ford Motor Company. This venerable business relationship, which sprang from the close friendship of Harvey Firestone and Henry Ford at the beginning of the automotive age, was being sorely strained by a dispute between these longtime partners over problems with the Firestone tires installed on Ford’s popular Explorer sport utility vehicle (SUV). By 2001, 203 deaths and over 700 injuries had resulted from rollovers in the Ford Explorer after the tread of Firestone tires separated. The showdown came at a meeting on May 21, 2001, when three senior Ford executives flew to Firestone’s Nashville, Tennessee, headquarters to discuss the cause of these tragic incidents with Firestone’s chief executive John Lampe.
Both Ford and Bridgestone/Firestone (Firestone merged with the Japanese tire manufacturer Bridgestone in 1988) had long been aware of safety problems with the Ford Explorer equipped with Firestone tires. When the development of a new SUV was begun in 1986, Ford executives insisted that the vehicle be cheap to produce and in production quickly. The solution that Ford engineers proposed was to bolt a passenger cabin to the chassis of the existing Ranger pickup truck. For additional cost and time savings, the vehicle could be built on the available Ranger assembly line. Initial tests on the prototype, code-named UN46, showed the vehicle to be unstable. It was prone to tipping when cornering or changing lanes and to rolling over in the event of a tire failure.
Road performance could be improved by widening the wheelbase and lowering the center of gravity, but instead of these costly improvements, Ford engineers proposed softening the suspension system and lowering the pressure on the tires. Rather than the prescribed 30 to 35 pounds per square inch (psi), the engineers recommended 26, even though low-pressure tires create more heat, especially in hot climates. In February 1989, tests of Firestone tires at 29 psi showed “a severe ‘tread package’ separation from the tire carcass.” 85 The soft suspension system as well as the heavier weight of the Explorer compared to the Ranger truck (600 pounds more) further contributed to the heat buildup. When the lower tire pressure reduced fuel efficiency, Ford ordered Firestone to cut the weight of the tires by 3 percent in order to meet federal Corporate Average Fuel Economy (CAFE) standards. 86
Soon after the Ford Explorer hit the market in March 1990, reports of tire failure followed by rollovers were received by both Ford and Firestone. The first complaints came from the Middle East and Venezuela, where rough road conditions were common. Drivers in Saudi Arabia and other Persian Gulf countries often lowered the tire pressure to gain traction on sand and neglected to add air for highway driving. Ford quietly replaced the original Firestone tires on thousands of vehicles outside the United States without calling the action a recall or reporting it to the National Highway Traffic Safety Agency (NHTSA). Reports of tire failure in the United States involving Firestone tires came largely from Florida, Texas, Arizona, and other warm-weather states.
On August 9, 2000, Firestone, which had been tracking warranty claims and other reports of tire failure, announced a recall of all 15-inch ATX and ATX II tires, as well as all Wilderness AT tires made at Firestone’s Decatur, Illinois, plant. This recall covered an estimated 6.5 million tires still in use. Firestone engineers determined that a design flaw in the ATX tires resulted in cracking in the so-called shoulder pockets, which are scalloped areas on the side of the tire that give traction in snow and soil. 87 In addition, the Decatur plant, which endured a bitter strike in the years 1994 to 1996 that led to the production of inferior tires, used rubber pellets, which did not fuse as well as the rubber sheets used at other Firestone facilities. Despite these defects, there were few reports of tire failures involving Firestone ATX tires installed on the lighter Ranger pickup truck.
By the time of the recall, it was evident that whatever the design flaws in the Ford Explorer and the Firestone ATX tires, the combination of the two—an Explorer equipped with Firestone tires—was a dangerously defective product. Firestone executives insisted that its tires were safe when installed on appropriate vehicles but that Ford was at fault in installing them on the Explorer. Tire failures on Explorers would not be so severe, they added, if the vehicle were not so prone to rollovers. Moreover, they held that the search for causes should focus, to some extent, on the design of the Explorer. In testimony to Congress, Mr. Lampe noted that there had been 16,000 rollovers of Explorers and that tire failure had been the cause of less than 10 percent of those accidents. 88 He also observed that more than 80 percent of the failures occurred on the rear wheels and more than half of those on the left rear tire. 89 Firestone also faulted Ford for addressing the Explorer’s instability by recommending the lower tire pressure and also for steadily increasing the weight of the Explorer during the mid-1990s, which further eroded the tires’ margin of safety. Consumers were also at fault, they claimed, for not maintaining proper inflation and making repairs correctly. 90
Jacques Nasser, the CEO of Ford, countered, “This is a tire issue, not a vehicle issue.” 91 Ford released data showing that during a five-year period, Firestone tires on 1996 Explorers were involved in 30 fatal accidents per million tires produced while Explorers equipped with Goodyear tires were involved in only three fatal accidents per million tires produced, one-tenth the number. 92 Although automobile manufacturers dictate tire specifications to their suppliers, Firestone still chose to provide the tires for the Explorer that Ford demanded. Interestingly, Goodyear stopped supplying tires to Ford in 1997 because executives decided that they could not meet their own quality standards at the price that Ford was willing to pay. 93 Despite numerous warranty claims, though, Firestone failed to recognize the seriousness of the problem and to share the information with Ford. One reason for these failures is that after the merger of Firestone with Bridgestone, the database of warranty claims remained in Akron, where Firestone was located, while the database on damages was moved to Nashville, the home of Bridgestone. 94 Once the problem was recognized, Firestone issued a recall for the 15-inch ATX and ATX II tires but not the 16- and 17-inch tires, which some believed were also defective.
Prior to the May 21 meeting, each side had provided the other with some of the auto safety data they had collected. It soon became apparent that each company was interpreting the data differently and using them to place responsibility on the other. 95 The Ford executives would not comment on a report that the company was preparing to replace virtually all suspect Firestone tires on its Explorers, and they refused a request to conduct a joint investigation into the safety of the vehicle. What they wanted to talk about instead was data that suggested problems with yet other Firestone tires. At that point, John Lampe handed the Ford executive a letter he had composed in advance, severing all relations between Firestone and Ford. The next day, Ford announced the company would replace 13 million Firestone tires at a cost of $3 billion. 96 Jacques Nasser was surprised that Firestone would walk away from $7.5 billion in annual sales, which was 40 percent of Bridgestone/Firestone’s global revenues. Mr. Lampe, in his letter addressed to Mr. Nasser, wrote, “Business relationships, like personal ones, are built on trust and mutual respect.” He explained, “We have come to the conclusion that we can no longer supply tires to Ford since the basic foundation of our relationship has been seriously eroded.” 97Thus, the relationship forged by Harvey Firestone and Henry Ford a century ago came to an end amid mutual recriminations.
1519023540 02/18/2018 11:59pm
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