MNGT MAY 2012 PRESENTED BY Cody Lewis Josh Palmer Brian Riley CASE STUDY FIRESTONE’S TIRE RECALL

OVERVIEW Case Study Background Regulations and Laws Involved Issue at Hand Case Analysis

CASE STUDY BACKGROUND Firestone Tire and Rubber Company and the Ford Motor Company  Harvey Firestone and Henry Ford  The Millionaire Club  Partnership formed in 1906 The Tire Industry  Plagued by recalls to include  Tread separation  Improper inflation and installation  Bead flaw  Exposed belt wire

CASE STUDY BACKGROUND Attention on Firestone  Turbulent times  Tread separation leads to death  In 1978, largest tire recall in history In 2001, the Partnership Ends   OR  The Case Study  Firestone tires  Ford Explorer VS

REGULATIONS AND LAWS INVOLVED Tort Case  Definition: A civil wrong other than a breach of contract  Criminally liable for negligence Damages  Settlements for those injured

ISSUE AT HAND Who’s at Fault  Firestone with their tires?  Ford with their Explorers?  Both? Civil Lawsuits  Who pays damages  What is the appropriate punishment

ISSUE AT HAND Who’s at Fault  Question 1: Does the company owe a duty to it’s customer?  Firestone  Ford  Question 2: Did the company violate that duty?  Firestone  Ford  Question 3: Did that violation cause harm to the customer?  Firestone  Ford  Question 4: Was the harm foreseeable?  Firestone  Ford

ISSUE AT HAND Firestone  Does the company owe a duty to it’s customers  Supply a quality tire that is safe  Manufacturing processes meet standards  Duty to bring up issues that are in violation  Did the company violate the duty  Covered up tire quality issues  Decatur Plant  Covered up tire tests  Did the violation cause harm  Blowouts caused around 250 reported deaths  Was the harm foreseeable  Industry records verify that tread belt separations

ISSUE AT HAND Ford  Does the company owe a duty to it’s customers  Supply quality automobiles that are safe  Manufacturing processes meet standards  Did the company violate the duty  Failed to verify their suppliers products (i.e. Firestone) are safe  Did the violation cause harm  Rollovers played a role in the reported deaths  Was the harm foreseeable  Ford had data that indicated, “… little to no margin for safety in top-speed driving at 26 psi.”

CASE ANALYSIS Do what extent do companies need to make a proactive effort to evaluate safety concerns? What mistakes did Ford, Firestone, and NHTSA each make early on in the crises? What possible ethical implications when accepting responsibility versus blaming others? Suggest measures that Firestone could take to improve tire quality in the future

CASE ANALYSIS Do what extent do companies need to make a proactive effort to evaluate safety concerns?  In 1972, the US enacted the Consumer Product Safety Act  Power to issue recalls and develop safety laws  Companies should not only meet the standards  Consulting companies that specialize in quality assurance  Every company owes a duty

CASE ANALYSIS What mistakes did Ford, Firestone, and NHTSA each make early on in the crises?  All three failed to adhere to warning signs  Issues with tires, tire pressure, and customer complaints  Firestone has the majority of the responsibility  Faulty manufacturing plants  Analysis that identified problems  Employees who brought up issues

CASE ANALYSIS What possible ethical implications when accepting responsibility versus blaming others?  Unethical decisions can cause negative impacts  Company loses creditability and maybe their customer base  Public opinion  Legal issues  Ethical decisions will have less of an impact  Public opinion  Strong customer base  Attractive company to those looking for work

CASE ANALYSIS Suggest measures that Firestone could take to improve tire quality in the future  Three step approach  1) Reinvest in manufacturing plants Retrofit their plants with state of the art equipment  2) Product testing Responsible to perform extensive testing  3) Quality assurance department Coordinate with the product testing department Culture change  Educate employees the importance of quality, regulations, and empower them to point out problems