September 29, 2000 (Ira Pilgrim)

Ford and Firestone

So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not.

Milton Friedman

If you watch television you now know what the president of Ford looks and sounds like. His name is Jacques(pronounced Jack) Nasser(pronounced Nasser as in Gamal Abdul). It is obvious from the way that he speaks that he is Australian (pronounced Awe stry lyan). He is trying to convince the public that Ford is only interested in the safety of its customers and that the tire problem was entirely the fault of Firestone. He hasn't convinced me.

I know that, without exception, all car manufacturers' principle interest is the bottom line. Anything that enhances profit is good and anything that hurts it is bad. There is no question that the tire debacle is going to hurt Ford badly. If nothing else, it will cost them megabucks for the ads alone. It is also sure to hurt future sales. Ford has now acquired the same image that the tobacco companies have; that they don't give a damn whether people are killed by their product as long as the money rolls in. I think that it couldn't happen to nicer guys.

Ten years ago some people were injured or killed when the tread on some Firestone tires peeled off when the vehicles were traveling at high speeds in hot weather. At that point, Firestone should have recalled all of those tires and immediately found out what the problem was and corrected it. That is what a responsible company would have done. It would have been a very expensive thing to do and it would have cut into their profit substantially; but not as substantially as it will now. Now Firestone faces bankruptcy. They not only face expensive lawsuits, but Firestone now represents everything that is BAD about industry. The company is now called Bridgestone-Firestone since it merged with the Japanese company. Bridgestone is a literal translation of the Japanese word Mitsubishi.

Ford got into the act when they used those tires on their most popular sport utility vehicle(SUV). We now know that the tread can peel off of those tires when they get hot. Things that contribute to tire heat are the air temperature, road temperature and the amount of tire inflation, with low tire pressure meaning more heat build up. The accidents happened in hot weather at highway speeds. After the Ford Explorer was designed and built they found that it was a bit tippy. If Consumers Union tested it as it was, it might have condemned it as it did the Suburu Samurai. To correct that problem would have meant redesigning the vehicle. They opted instead to recommend lowering the tire pressure. Result: many of the accidents happened to the Explorer. Nasser says that it's all Firestone's fault. In spite of this, Ford intends to continue using Firestone to supply tires for its vehicle.

When the first Fords crashed due to tire failure, alarm bells should have gone off at Ford. They should have immediately changed tire manufacturers and recalled those Firestone tires. They did not. It was an almost fatal mistake for Ford and when a mistake of that magnitude is made, it can only be attributed to top management. Having top management problems is nothing new for Ford.

Ford will probably survive. It has survived problems before and apparently the owners of their other models seem satisfied. In all probability the name "Firestone" will cease to exist, but as long as there are fools at the head of some corporations who take Milton Friedman's advice literally, the events that lead up to their demise will continue. But make no mistake about it, they are very clever fools. They would have to be to get to head large corporations.

Next column

Return to the Economics Home Page

Return to Ira's Home Page