Commentary: What Japan's Ce Os Can Learn From Bridgestone

Bridgestone chief Yoichiro Kaizaki has never been one to bow out when the going gets tough. Immediately after the Japanese tiremaker took over money-losing Firestone Tire & Rubber Co. in 1988, General Motors cut its long supplier relationship with Firestone. A few years later, Firestone was hit with a 28-month strike over Kaizaki's bid to lengthen work shifts and tie pay to productivity. Kaizaki never flinched. He broke the strike by bringing in 2,000 replacement workers, restored Firestone to profitability by slashing costs, and ended up in GM's good graces again in 1995 when it was named the carmaker's supplier of the year.

It therefore came as a surprise when, on Jan. 11, Kaizaki announced that in March he would step aside as Bridgestone Corp.'s chairman, president, and CEO--while the company is still struggling to recover from last year's massive recall of Firestone tires. Until then, Kaizaki, 67, had been handling the crisis as stoically as he had previous challenges. He defiantly refused to resign, even though he was due to retire, in order to defend Firestone's reputation after its tires were blamed for contributing to some 148 roll-over deaths, mostly involving Ford Motor Co.'s Explorer sport-utility vehicles.

CIRCLE THE WAGONS. So why leave now? Because the times are changing for executives such as Kaizaki who rely on a circle-the-wagons style of crisis management. Rather than acting promptly to control the damage when the news first broke, he fell into the Japan Inc. habit of refusing to engage his critics until the firestorm was raging. Then he came out swinging. That did nothing to halt the stock's 60% slide since August. Although Bridgestone insists his departure has nothing to do with Firestone, it's hard not to view Kaizaki's hastily announced retirement as proof that he had become a liability.

Japanese executives should learn from Kaizaki's fall from grace. Lesson One has to do with public relations. Had it publicly released its own data on tire problems when U.S. authorities began a probe in May--months before the crisis exploded--Bridgestone could have shown it was on the case. But Tokyo headquarters stayed silent, a tactic many Japanese managements believe conveys an image of calm deliberation. Today, when even Japan's media are suspicious and quick to criticize, that invites disaster. Lesson Two is that Japanese consumers and investors are shedding their long-suffering ways. They are more attuned to product liability problems--and doubt nonchalant denials. So Japanese CEOs now face potential P.R. blow-ups at home as well as in the West.

Lesson Three is that Japanese companies cannot escape global forces. In Bridgestone's case, foreigners own 22% of its Tokyo-traded shares. And these investors trade on their own perception of management competence, not assurances from headquarters. "Investment decisions are increasingly guided by the freer flow of corporate information and greater participation by foreign investors," says Tokyo-Mitsubishi Securities analyst Hideaki Aonuma.

Bridgestone had a low regard for P.R. and financial disclosure long before the Firestone crisis. Its arrogance cost it dearly. For example, Kaizaki tried to pin blame on Ford by producing an in-house study exonerating Firestone's tire design of responsibility for the accidents. But that effort just drew more attention, especially after knowledge to the contrary emerged and Bridgestone settled a U.S. lawsuit with one victim. Two independent studies due this year could be even more devastating.

In recent weeks, Kaizaki seemed finally to wake up. He started showing unprecedented willingness to disclose key financial data about Bridgestone's long-shrouded U.S. operations. But this has come after incalculable damage to Bridgestone's image. Indeed, some analysts believe it may have to withdraw the Firestone brand from the U.S., where sales to consumers have plunged.

It would be a sad irony if new evidence shows concerns over Firestone tire safety are not warranted. If so, the damage caused by Kaizaki's slip-ups will have been needless. Japanese managers should use Bridgestone as a case study in how not to handle crisis in a global environment.

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