Firestone Dealers Still Feel the Heat
The worst is over for Pete Lilly, a Firestone tire dealer in Lake Tahoe, Calif. He has put behind him, with no hard feelings, the months of extra work and aggravation brought on by the recall of millions of Firestone tires nationwide. He also put behind him the Firestone sign that stood in front of his business for more than 30 years
"I think there's probably a lot of that going on," says Bob Katz, a Boston-area tire dealer and president of the New England Tire & Service Assn. "You might still believe in the product and still sell the product, but you might turn people off by having the sign out front."
Dealers have replaced more than 6 million of the 6.5 million tires recalled by Bridgestone/Firestone in August after blowouts or tread separation was cited in hundreds of accidents involving Ford Explorers. These dealers were on the front lines of the recall, taking back dozens of tires a day and putting anxious and sometimes angry customers on waiting lists for replacement tires.
Switching all those tires, at a cost of $450 million so far, probably was the easy part for Nashville-based Bridgestone/Firestone and its parent, Japan's Bridgestone Corp. (BRDCY ). Ford and Firestone recently settled, for an undisclosed amount, a lawsuit brought by a Texas woman who was paralyzed in a tire-related Explorer crash last year. The suit had asked for more than $100 million. More than 200 other suits have been filed. As part of the Texas settlement, both companies are being forced to release documents they fought to keep private, and Firestone agreed to analyze failures in 300 tires, some of which were not on the August recall list.
In February, when it announces financial results for 2000, Bridgestone is expected to post a $500 million net loss. After doubling its market share in the 1990s, it is now expecting to lose North American share for replacement tires this year. Its stock has fallen by two-thirds in the last year, trading at 83 on Thursday, and this week Bridgestone President and CEO Yoichiro Kaizaki announced he will resign in March, part of the company's effort to restore confidence. Will the company's bottom line -- and brand -- survive? Dealers don't know.
Katz has asked Firestone President and CEO John T. Lampe to address the annual meeting in April of the New England Tire & Service Assn. So far, Lampe hasn't agreed to be there, Katz says.
The fact that Katz, Lilly, and other dealers think Firestone is unfairly being blamed for problems caused by Ford isn't worth that much in the court of public opinion, they acknowledge. "People come in and say, 'I prefer not to have Firestone,' I grit my teeth. I don't say anything because I would like to make the sale," Lilly says. "I thought it was Ford's problem, and I'll always feel that way." Ford has increased the recommended tire pressure for Explorers from 26 pounds to 30 and has announced design changes for the SUV intended to prevent rollovers.
Dealers haven't defected, says David Dickson, spokesman for Bridgestone/Firestone. The size of the dealer network, 13,000 nationwide, hasn't changed much from a year ago, he says. "I am sympathetic with those who took the sign down, but they are not the norm." Although an unnamed dealer in Mississippi has sued the company for losses he claims were caused by its misconduct, according to the trade publication Tire Review, nearly 4,000 dealers gave company President and CEO John T. Lampe a standing ovation at the annual Bridgestone/Firestone dealers meeting in November.
But there's little applause from a skeptical public, dealers acknowledge. About 18 months ago, when Firestone was still increasing its market share, a popular, longtime dealer at a company-owned store in Revere, Mass., retired. Katz, who had a branch of his tire-service business nearby on the same busy highway, figured the time was ripe to turn his place into a Firestone location. "I was looking to become the Firestone dealer in that community," he says. But the plan, which was put on hold when Katz's property was bought out by a developer, has been abandoned. "Today, I would hesitate because of the bad publicity, whether it's rightful or not."
The company has announced internal changes designed to improve communication with both dealers and consumers, it has expanded its warranty program, and it acts more quickly on reports of potential defects. Early this month, Firestone announced a recall of 8,000 truck tires after it found that the rubber in about 150 tires made on Apr. 24 at its plant in Curenavaca, Mexico, were contaminated with an unspecified material. The entire week's production was recalled as a precaution, according to the company, although no injuries or accidents were reported. "We handle information differently now," Dickson says, referring to the swiftness of the latest recall.
The information many dealers are looking for is more long-term. Can Bridgestone/Firestone endure the mounting costs of the recall, sales decline, and lawsuits? How much customer loyalty has been lost for good? Should they cut their losses with Firestone?
When those answers emerge, Lilly will no longer be on the front lines. He's preparing to retire and turn over Pete Lilly's Firestone Tires to his son. As part of those preparations, about six weeks ago they changed the name of the business. It's now simply Lilly's Tire Service.
By Theresa Forsman in New York
Edited by Robin J. Phillips