Firestone Tire Recall Business & Marketing Essay (Essay Sample)

Case Study Report: Firestone’s Tire Recall
Student’s Name
ORGM 403(96) Business Ethics
Due Date
Case Study Report: Firestone’s Tire Recall
Summary
Tire failures are common incidents in the tire industry, and are primarily attributable to the manufacture of low-quality and defective products. Since the 1970s, numerous companies, including B.F. Goodrich, General Tire, Firestone, Kelly-Springfield, and Cooper Tire and Rubber, among others, have had to recall their products due to reasons ranging from sidewall cracking to bead flaw, tread separation, and improper inflation and installation. In 1978, Firestone had to recall approximately 14.5 million tires globally due to issues related to tread separation. Specifically, excessive application of the adhesive used to bind rubber and steel caused the blowouts and tread separation. Subsequently, the firm had to incur huge costs in replacement fees, fines, and public awareness campaigns, which ultimately undermined its profitability.
Firestone, which was founded in 1900 by Harvey Firestone in Akron, Ohio, and which merged with Bridgestone Corporation in 1990, had developed a stable business relationship with Ford Motor Company over the years. Firestone supplied tires to the latter for use in its broad range of passenger vehicles. Reports of flaws in Firestone tires started surfacing in 1998 when Sam Boyden, a research administrator at State Farm Insurance, found 20 instances of tread failure dating back to 1992. This information was conveyed to the National Highway Traffic Safety Administration (NHTSA), which failed to act on it until 2000 when KHOU-TV aired a nine-minute segment on the issue after independent investigations. Even then, NHTSA was slow to take action.
Investigations revealed that Form had recalled Firestone tires in Venezuela without Firestone’s involvement because of defects. Further enquiries defects in particular tire models mounted on Ford Explorers, specifically. The flaws were found to have caused multiple deaths in the U.S. As a result, Ford and Firestone recalled 6.5 million tires across the country and issued public notices and advertisements to customers advising on the procedure for tire replacement. The recall exerted immense pressure on the demand for tires, which compelled Bridgestone to send additional replacement tires to Firestone’s U.S. factories. Firestone also had to double its production to meet the demand, which competitors were compelled to take part in the replacement exercise by providing more tires.
Investigators found that Firestone was aware of the defects as well as the associated risks, but the management choose to ignore them. The company later admitted to making defective tires. At the same time, Ford created a crisis management team to address customers’ concerns during the recall. The firm also allocated additional resources to the exercise and negotiated with Firestone competitors to increase the production of replacement tires. It also redesigned the 2002 Ford Explorer to increase safety. Enquiries revealed that Firestone’s Decatur factory had numerous concerns that could have compromised tire quality, including unfit quality inspectors, poor ventilation, and dilapidated equipment. Ford may also have been aware of the faults, but the management opted to use low pressure in the tires rather than fixing the problem.
This debacle resulted in significant legal and financial repercussions for all stakeholders. Firstly, both firms had to pay hefty fines for their negligence. Secondly, they both faced declining sales volumes and share prices due to the erosion of consumers’ confidence. Thirdly, the companies faced numerous criminal charges and private lawsuits, which resulted in large payments that further strained their financial positions. Fourthly, tire distributors were forced to rebrand, remove Firestone stocks from their premises, or alter their product lines to stay in business. The incident also compelled the Senate to pass a bill to deter corporate executives from selling defective products.
1 To what extent to companies need to make a proactive effort to collect and analyze data concerning possible safety issues?
Business entities are required to adhere to local, state, and federal laws when conducting their business. The 1972 Consumer Product Safety Act protects the public from unnecessary risks related to product quality, helps users to evaluate safety information, establishes universal safety standards, and promotes investigation and research into the causes and prevention of product related injury or death (Suhanyiova, Flin, & Irwin, 2016). Therefore, firms should ensure that their products meet certain safety standards by conducting routine product quality checks and consulting competent quality assurance practitioners. Companies also owe a duty of care to their customers. This legal responsibility requires individuals and organizations to avoid any omissions or conducts that could lead to reasonably foreseeable harm to third parties. As such, firms are required to ensure that their products are safe for public use. They should take all necessary measures to prevent behaviours that could harm others. They should also provide safety precautions and warnings concerning any likely dangers that may result from the use of products. This duty also requires all companies to implement acceptable quality standards in their factories, and to reveal issues that may violate this duty. Organizations are also bound by ethical rules that regulate their behaviour (Suhanyiova, Flin, & Irwin, 2016). Accordingly, it would be unethical for a company to ignore safety issues that could cause harm or death to customers. Moreover, companies bear a responsibility to respect human dignity and promote justice, fairness, and the common good. This notion implies that products should be designed to enhance consumers’ lives and living standards while protecting them from danger. They should prevent all undesirable burdens while maximizing the benefits to society.
2 What mistakes did Ford, Firestone, and the NHTSA each make in early attempts to handle the crisis?
Each of these companies contributed to the subsequent harm that resulted from Firestone tires’ tread separation. Firstly, Firestone failed to ensure the appropriateness of its manufacturing facilities. Specifically, the company’s Decatur plant did not meet established standards as it was poorly ventilated and its machines were worn out. The quality inspectors were also compromised and overworked due to the two-year strike. Moreover, the management ignored past reports about the potential danger and even tried to conceal the problems by increasing production. On the other hand, Ford knew of the defects in the tires as stated by a Venezuelan source as well its own investigation in Valencia. However, rather than alerting authorities, Firestone, or its customers, the company chose to recall the tires in Venezuela only, leaving all other customers in danger. Additionally, Ford opted for low pressure in the defective tires despite having proof of the risks of low tire pressure in cars as well as the technical specifications of th