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Documents Show Firestone Knew of Rising Warranty Costs
The New York Times
September 2000
Washington, Sept. 7 - Internal documents from Bridgestone/Firestone show that officials of the company were briefed as early as February about rising warranty costs for the tires that the company recalled last month.
Documents obtained by investigators working for Representative Billy Tauzin, the Louisiana Republican who is the chairman of the House Commerce Subcommittee on Consumer Protection, show that members of Firestone's sales staff were aware of increasing warranty claims for the company's light truck tires even as Firestone, the American unit of Bridgestone of Japan, told the Ford Motor Company and regulators that the tires did not have problems. The documents were distributed to members of the subcommittee in preparation for its hearingWednesday, but were not discussed at the hearing.
Mr. Tauzin said that Firestone's safety officials should have been concerned about the warranty information. "You can't have that much information floating around and not have noticed a problem that should have been notified to federal authorities," he said.
The Congressional investigators' documents include charts prepared for the sales staff's annual meeting in February that repeatedly and prominently mention the high cost of warranty claims for tread separation in light truck tires, but do not calculate a cost per tire in use.
The label on one chart read "Separations increasing" in large underlined letters. The chart showed that the number of warranty "adjustments," or claims, for tread separation had climbed to 4,694 in 1999 from 4,200 in 1998, an increase of 11.8 percent. The chart also described how the tires were coming apart and the rates at which each type if separation was increasing. Firestone's market share grew by eight-tenths of a percentage point in 1999 from 1998, according to Tire Business magazine, while the overall market for tires grew by 4.7 percent in terms of sales. The actual number of tires sold is an industry secret.
Five more charts analyzed patterns in tread separations and emphasized tires for light trucks, a category that includes the Ford Explorer. One of those charts, labeled "separations," showed that the number of separations involving Wilderness tires, on sale since 1996, had risen 194 percent in 1999 from the level a year earlier.
A separate collection of charts, prepared for the same sales meeting in February and labeled "Critical Performance Issues," also singled out light truck recreational tires of the sort installed on Explorers, with one chart stating in large letters: "Wilderness AT needs improvement."
Firestone recalled 6.5 million ATX, ATX II and Wilderness AT tires on Aug. 9 after Ford analyzed the tire maker's data on crash claims and found a pattern of property damage and injury claims dating back at least to 1997. Firestone officials said then and have said repeatedly since then that they missed the trend of crash claims because they were focusing on warranty data that did not show a problem.
A growing number of lawmakers have been calling for a criminal investigation of Firestone and Ford. Attorney General Janet Reno said this morning that she was reviewing such a request from Senator Patrick J. Leahy, Democrat of Vermont. But Justice Department officials said that an investigation was not likely because the federal law covering auto defects is fairly weak.
The law provides for fines of no more than $925,000 on manufacturers and does not authorize criminal penalties. Firestone and Ford, and possibly their executives could still face prosecution by state or local authorities, however, if it is proved that they knowingly sold products with deadly defects.
Robert Grossman & Associates, LLP
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White Plains, NY 10605
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