Awa TraoreBenih HartantiIrwan Arfandi B.

Business Ethics Case : Ford FirestoneMaster of Management – Gadjah Mada University

Videos of Ford-Firestone Case

Lets Go...

Introduction & Question Number 1

Presents by Mr. Irwan Arfandi B.

Tragedy

• Two hours into the trip on July 25, 1999, the passenger side rear tire shredded at 70 mph. The Explorer flipped twice. Query was thrown onto Interstate 95 and killed.

• They didn’t detect a problem so they jumped in and headed back onto interstate 75. Less than a minute later the driver side tire fell apart and the Mountaineer flipped. Kirsten, a 20-year-old sophomore from Harvard was killed

Tragedy

• Just 10 minutes from Indialantic home, the rear tire on the driver side came apart at 70 mph.

• The 1996 Explorer rolled over, once, twice, three times. It stopped in a mass of trees off Interstate 95 in Melbourne.

Controversy ??

• The Firestone and Ford tire controversy was a period of unusually high tire failures on some Ford vehicles, resulting in numerous accidents.

• In May 2000, the National Highway Traffic Safety Administration (NHTSA) contacted Ford and Firestone about the high incidence of tire failure on Ford Explorers, Mercury Mountaineers, and Mazda Navajos fitted with Firestone tires.

Investigated!!

Ford investigated and found that several models of 15" Firestone tires (ATX, ATX II, and Wilderness AT) had very high failure rates, especially those made at Firestone's Decatur, Illinois plant. This was one of the leading factors to the closing of the Decatur plant.

Investigated!!• Joan Claybrook, who was the president of the

public advocacy group Public Citizen and previously an Administrator of the NHTSA, stated before the Transportation Subcommittee United States Senate Committee on Appropriations on September 6, 2000, that, "there was a documented coverup by Ford and Firestone of the 500 defect".

• Also Clarence Ditlow; Executive Director for the Centre for Auto Safety in his statement before the Senate Committee on Commerce, Science and Transportation in Washington DC, September 20 2000 stated "Emerging Information shows that both Ford and Firestone had early knowledge of tread separation in Firestone Tires fitted to Ford Explorer vehicles but at no point informed the NHTSA of their findings".

Answering The Question

Question Number 1

• Systemic Issues Explorer was designed as a SUVs car to travel off-road, built

high off the ground to clear rocks and other obstructions underneath. And this car became the most popular SUV in America since many people tend to prefer it as a spacious, safe, and reliable four-wheel-drive vehicle for the family. It fulfilled consumers’ desire for ruggedness combined with comfort.

• Corporate IssuesFord’s engineered designed the Explorer to use the Twin I-Beam suspension to raised the vehicle’s center of gravity. In 1989, Ford's engineers suggested several design changes that could improve the vehicle’s stability. Ford began selling the Explorer with the ATX, ATX II, and Wilderness AT, and recommended that owners maintain their tires at 26 psi instead of the usual 30 psi.

• Individual IssuesIn 1990, whereas the engineers suggested several design changes to improve the vehicle’s stabilty, Ford management rejected the more fundamental redesign options or replacing the Twin I-Beam suspension.

• Systemic IssuesFirestone manufactured tires needed by the automobile industries

• Corporate IssuesFirestone manufactured tires for Ford

• Individual IssuesGary Crigger – a Firestone executive – explained : “Claims and lawsuits are not considered to be representative throughout a line. They are considered to be individual cases that occur for a variety of reasons. So they have never been part of [the product] performance evaluation.”

Question Number 2 : “Talk About Theories”

Presents by Ms. Benih Hartanti

a. The Contract View of Business Firm’s Duties To ConsumersThe view that the relationship between business firm and its customer is essentially a contractual relationship, and the firm’s moral duties to the customer are those created by the contractual relationshipThe contractual theory of business firm’s duties to consumer claims that a business has four main moral duties:

What they should have done differently:

FordWith a purpose of reducing the cost by using the same assembly line, Ford should not using the Twin-I-Beam as a part of the new product and fulfill the Firestone recommendation of using 35-36 psi on its tires. Informs more instruction to the buyer of any risk that could be arise in any kind of condition such as the pressure of tire, demography and etc.

FirestoneEven though its duty of complying the recommendation of Ford had been conducted as a business partner, but for the customer, Firestone should conduct the quality standard as Bridgestone recommendation.Related to its responsibilities after the tragedy, Firestone should involved more participates in replacement and provide enough tires available to meet the sudden deluge of request.

b. The Due Care TheoryThe view that because manufactures are in more advantaged position, they have the duty to take special care ensure that consumer’s interests are not harmed by the product that they offer them Producer’s specific responsibilities to exercise due care extend to the following three areas:

What they should have done differently:Ford Instead of only recommending the change of the tires Ford should change design of its own part that be able to increase the stability by redesigning SUVs with no higher center of gravity , option of setting the wheels farther apart, lowering the engine, or replacing the Twin I-Beam suspension, and obey recommendation a pressure of 30-35 psi as Firstone’s.

FirestoneAs an expertise, Firestone should recognize the risk of complying the Ford’s specification but still they should consider about customer’s safety by refusing Ford’s recommendation.

c. The Social Costs View of Manufacture’s DutiesThe view that manufacturer should pay the costs of any injuries sustained through any defects in the product, even when the manufactures exercises all due care in the design and manufacture of the product and has taken all reasonable precautions to warn users of every foreseen danger

What did they do wrong :Ford and Firestone only pay the cost of recalling the product

What they should have done differently:Ford and Firestone should pay all the injury cost caused by their product or internalizing its cost injury to their price as insurance.

Question Number 3“Responsibilities?”

Presents by Ms. Awa Traore

Deaths and Injuries Resulting from Firestone Tire Failure by State

(Current as of 2-6-2001)

Are They Know?

• Ford and Firestone officials acknowledge that some tires had design and manufacturing problems and that for years they failed to disclose crucial information about possible tire defects.

Its Too Late...

1. The first sign of a tread separation usually is a vibration, similar to going over speed bumps.

2. As the tire comes apart, the vehicle will pull toward the side of the separation. You may hear pieces of the tread hitting the underside of the vehicle.

3. A common mistake is to brake or try to correct the steering. Instead, you should hold the steering wheel as tightly as possible and take your foot off the gas pedal. Let the vehicle coast to a stop.

4. The vehicle may become impossible to control if you swerve into traffic, a median or a shoulder.

Some Facts..

Number of deaths? 200+

• 1975: Firestone tries to cure tread separation problems in the radial 500 tires caused by moisture getting inside the tire and corroding the steel.

• 1977: The National Highway Traffic Safety Administration orders Firestone to recall 400,000 tires from its Decatur, Ill., plant.

• 1978: Congress holds hearings on Firestone 500 problems blamed for 34 deaths. Firestone tells Congress the trouble is consumer ignorance and underinflation but agrees to recall 11.5-million tires.

• 1988: Japanese tiremaker Bridgestone buys Firestone.

• February 1989: A research lab hired by Ford reports tread separation problems with Firestone tires.

• 1992: Bridgestone/Firestone and Ford begin investigating tread separation complaints.

• 1997-98: Ford receives reports of tread separations on Explorers in Saudi Arabia.

• July 1998: State Farm notifies the federal government about 21 Firestone tread failures, 14 on Explorers.

• In reality, they were more concerned about the lauching of the product itself rather than the introduction of a good safe vehicle within the market place.

• Therefore, they choose to only install stiffer springs, shorten the suspension, and lower the tire, which in reality would not affect the launch date. This attitude could be seen as unethical.

• Because Ford management choose the lauching of the new ford Explorer rather than implementing the redesign suggested by engineers that would have made the vehicle safer. At this point, Ford is morally responsible.

• However, Firestone which had a long relationship with Ford, since 1896, could be also considered as morally responsible. They should have put systems in place that would have prevented the prolonged strike and thus avoid the hiring of non-union workers. The hiring of these workers impacted on the quality of tires produced at the Dacatur plant. This behaviour may be deemed as unethical. In fact, the poor quality of tires also caused fatalities and accidents.