COMM351 Essay

Danial Munsoor 3259882

Executive Summary Ford-Firestone case is a unique and an appropriate example of violation of business ethics by two renowned corporations, Ford Motor Company and Firestone Tire Company, each of which was the manufacturer of a different product. This essay talks about as to how the leading car manufacturer Ford, can be held morally accountable for the various accidents and deaths which occurred in US due to vehicle rollovers of its popular SUV known as the Ford Explorer. However, Ford executives some how managed to put most of the blame on Firestone by saying that the accidents and deaths occurred mainly due to tire blowouts, and therefore it is a Firestone tire problem and not a vehicle problem. On the other hand Firestone claimed that many of the accidents were mainly due to the vehicles lack of stability and were not due to its tires. Indeed much of the essay is about opposing statements made by the executives of Ford and Firestone. Therefore, in order to have a better understanding of the case, it is important to understand the difference between when an item is a product in its own right and when it is a component of another product. When thousands of parts came into a Ford assembly plant, Firestone tires were also like those other components that were acquired by Ford. Therefore it can be presumed that the tires were manufactured in a manner to suit the Ford specifications, and they did become a part of the assembly process. At the time of assembly Ford should have checked that whether the tires had the same high quality as other components. Even according to the Utilitarian Approach, the manufacturer of the product should be held responsible for the defects rather than the retailer, and it is the duty of every producer to ensure that it produces the safest products possible. Therefore based on the Utilitarian Approach, it can be concluded that Ford was unethical because it was controlling the process through which Explorer was produced, and therefore it is to be held morally as well as legally responsible for the defects which were present in the vehicle.

COMM351 Essay

Danial Munsoor 3259882

Corporate Responsibility, Ethical Blunders and Rollovers: An analysis of the Ford- Firestone Case
INTRODUCTION:
Ethics is a term that describes a whole set of values around how to behave morally, and treat people in ways that show respect for them. On the other hand Business Ethics can be defined as moral principles and values that govern decision and actions of a company. In the most basic terms, the definition of business ethics comes down to one thing, i.e. distinguishing between right and wrong and opting to do what is right (White, 2008). Ford-Firestone case is a unique and an appropriate example of violation of business ethics by two famous corporations, Ford Motor Company and Firestone, each of which was the manufacturer of a different product.

ABOUT FORD:
Henry Ford founded The Ford Motor Company in 1903 in Dearborn, Michigan. When the company began it used to produce few cars a day, with only two or three men working on each car. Ford revolutionized the car making industry and manufacturing by becoming the first one to use an assembly line technique to produce cars (Frontenac Motor Company, 2009). It is one of the largest familycontrolled organizations in the world and has been under family control for more than hundred years. It is the best truck maker in the world and comes second after General Motors in car manufacturing. Ford manufactures various forms of cars and light trucks. With a staff of 360,000 employees, Ford had revenues of more than $160 billion in 1999 (Rourke, 2001).

ABOUT FIRESTONE:
The Firestone Tire & Rubber Company was established by Harvey S. Firestone in 1900 in Akron, Ohio. The company began with only 12 employees, and it used to supply rubber tires for wagons and buggies. It was a leader in the mass production of tires. As years passed, Firestone realized that it had also had the

COMM351 Essay

Danial Munsoor 3259882

capability for manufacturing tires for automobiles. Therefore in 1990, it merged with Bridgestone Corporation of Japan to become Bridgestone/Firestone Inc. After the merger, the company went on to become a pioneer in tire technology. It developed more than 8,000 different types of tires for vehicles ranging from passengers to agricultural equipment to race cars. In 1999 the company had revenues of more than $20 billion (Rourke, 2001).

THE COMPANIES INVOLVED:

Ford Motor Company and Firestone was a partnership between the two industry giants, Henry Ford and Harvey Firestone. This partnership began in 1908 when Harvey Firestone supplied Henry ford with tires for his new Model T. Due to friendships among the members of the two families, the business relationship grew stronger (Noggle and Palmer, 2005). However, both the companies were unaware that their century-long relationship would end in such a tragic way. And it was in the year 2001 when both the companies announced that they will not enter into new contracts with each other anymore (Noggle and Palmer, 2005).

WHO IS TO BE BLAMED?
In this essay, we will observe how the pioneer car manufacturer Ford, can be held morally accountable for the various accidents and deaths which occurred in US due to vehicle rollovers of its popular SUV known as the Ford Explorer. According to a report, there were 700 injuries and 203 deaths due to the Ford-Firestone product failures (Hoyer, 2001). Studies show that Explorers lack of stability was mainly due to lower recommended psi and also due to the modifications which were made to the Firestone ATX and Wilderness tires (Rowell, 2008). However, Ford executives some how managed to put most of the blame on Firestone by saying that the accidents and deaths occurred mainly due to tire blowouts, and therefore it is not a vehicle problem and is a Firestone problem. On the other hand Firestone argued that many of the accidents were mainly due to the vehicles lack of stability and were not due to its tires. Indeed much of the essay is about opposing statements made by the executives of

COMM351 Essay

Danial Munsoor 3259882

Firestone and Ford. In other words, it was uncertain as to which product caused the accidents and therefore which company should be held accountable. Therefore, in order to have a better understanding of the case, we need to understand the difference between when an item is a separate product and when it is a part of another product (Noggle and Palmer, 2005).

AN ANALYSIS OF TIRE CRISIS:

Back in the mid 80s, Ford started working on one of its most popular SUVs known as Ford Explorer, which was a replacement for the smaller SUV known as the Bronco II. In May 1987, when a test (code named UN46) was done on the Explorer prototype, it indicated that the stability of the prototype was worse than Bronco II. According to a Ford internal memo, the optimal way to overcome the stability issue was by lowering the center of gravity, widening the Explorers wheel base, and using a smaller P215 tire. However, when further analysis was done, Ford realized that expanding the wheel base and lowering the center of gravity would have delayed the production, and hence it decided to act unethically (Rowell, 2008). Therefore a month later in June 1987, another memo was passed by Ford which approved the use of Firestone P235 ATX (not a smaller tire) tires on the vehicle. In 1988, when a computerized test was done on the ATX tires, it indicated stability issues at 35psi, but favorable results were expected at 26 psi. Hence in order to partially resolve the stability issue, Ford engineers offered a back up plan and that was to set an inflation pressure to 26 psi (Noggle and Palmer, 2005). Moreover, an internal Ford test report published on 25th November 1988 showed that Explorer was also lifting two wheels at a speed of 55 mph due to a high center of gravity and front suspension system (Rowell, 2008).

The P235 ATX tires were designed by Firestone specifically for this vehicle. Despite of knowing the safety margin of 25-35 psi for the P235 ATX tires, in January, 1989 Ford Motor Company went on to set the inflation pressure to 26 psi. Basically inflation pressure decides how inflexible the tire is: the lower the

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Danial Munsoor 3259882

pressure, the more the flexing around the sidewalls (Noggle and Palmer, 2005). The more the flexing, the greater the friction which results in greater heat being produced and excessive heat deteriorates a tires performance, and this can result in a tire blowout. As far as the ability of the tires to withstand heat is concerned, it depends on the whether the tire is A rated, B rated or C rated. If the tire is A rated, it means that it can withstand the excessive heat the most. However if the tire is C rated then it can not withstand the heat at all. As far as B rated tires are concerned, they fall in between the A and C rating category. Firstly by setting a low inflation pressure and secondly by selecting C-rated tires, Ford selected tires which were not heat resistant and could be expected to generate excessive amount of heat (Noggle and Palmer, 2005). Another factor, apart from the inflation pressure, that contributed to the tire damage was the excessive load of the vehicle. Due to the large size of the explorer, the recommended pay load was 750 1310 lbs. The pay load was such that it would have increased with several passengers and cargo load, and this would have put even more burden on the tires (Noggle and Palmer, 2005). On 11th January, 1989 a meeting was held with Firestone regarding jacking (i.e. lifting) the front suspension. As far as jacking the suspension was concerned, it was not relevant from the stability point of view (Rowell, 2008). As mentioned before, lowering the center of gravity could have resolved the stability issue to a great extent, but Ford was unwilling to do so because then the production would have been delayed. Therefore on 26th January 1989 Ford engineers stated that P235 ATX tires were not of a higher quality and they have not met its stability goal (Noggle and Palmer, 2005). Thus Ford decided to use a new set of Firestone tires known as the P245 ATX tires. The use of P245 ATX tires proved to be even worse. On 9th February, 1989 Ford hired Arvin/Calspan Company to test the P245 tires. According to the test report, there was a severe tread package separation from the tire carcass at 29 psi of pressure. However, in an internal memo to Ford, Firestone did agree to the test

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Danial Munsoor 3259882

report and admitted that the tire showed a sever tread separation. But Firestone assured Ford that the tread separation wont be much of a real problem (Rowell, 2008).

Firestones guarantee was good enough for Ford to continue with its decision to use Firestone tires and to set the pressure to 26 psi. In addition to setting up the inflation pressure, Ford officials also rejected some alternatives which could have improved the stability of Explorer because they wanted to meet the production deadline. It was in March 1990, that the first Ford Explorer was launched in the American market. And on 12th February 1991, the first tread separation case was filed against Ford and Firestone. However, both companies were unaware of the worse problems which were to come. Soon after the first Explorers were introduced in the market, tests showed that Explorer had a poor fuel economy. This was however due to the lower inflation pressure which was adopted to deal with the vehicles stability problems (Noggle and Palmer, 2005). Therefore, in order to improve the fuel economy of the 1995 model, Ford went against its engineers and decided to reduce the rolling resistance by making the tires lighter. As directed by Ford, in the year 1994 Firestone decreased the weight of the tires by 10%. However, the weight was reduced by making various modifications to the tire, such as removing material etc (Rowell, 2008).

After the weight of the Firestone tires was reduced, the number of accidents with the Firestone-Explorer grew rapidly. The accidents mainly occurred when the tires tread literally separated from the tires body, which caused the explorer to become incontrollable and rollover-frequently which led to deadly accidents (Noggle and Palmer, 2005). In the process, both Ford and Firestone were sued by the victims. For sometime, many of the Explorer-Firestone ATX problems did not come to public attention. And it was in 1998, that the State Farm Insurance Company reported 21 Firestone tire failures to National Highway Traffic Safety Administration (NHTSA). This issue gave NHSTA a reason to investigate into the matter. According to NHTSA, there were 14 Ford-Firestone cases already

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Danial Munsoor 3259882

reported between1991 and 1995. However, NHTSA did not formally commence its investigation until May 2000 (Noggle and Palmer, 2005). While NHTSA was planning to investigate into the matter, Ford started to replace tires in Saudi Arabia and in Venezuela, after it came across the similar patterns of accidents. Ford was lucky that NHTSA was not authorized to request recall information from overseas countries (Noggle and Palmer, 2005).

THE FIRESTONE TIRE RECALL:

On 9th August, 2000 Firestone executives voluntarily recalled approximately 6.5 million tires. The recall was the second largest tire recall in the History of U.S. The recall campaign included several Firestone tires like P235, ATX, ATX II and Wilderness AT, many of which were installed on the Ford Explorer (Noggle and Palmer, 2005). According to a research the estimated tire replacement costs were around $350 million. And if the fines and compensation charges were included in the total costs to be shared by Ford and Firestone, the amount would add up to approximately $1 billion. Moreover, when Ford was committed to the recall, it was very slow in approaching the public and the media (Verschoor, 2000).

A COUNTRYWIDE SCANDAL UNCOVERED:

At that time, the complete proof of what caused the accidents was yet to be discovered. However, studies suggest that there were numerous factors that caused the deadly accidents. According to tire experts there were possible design flaws which were due to poor materials and processes used in their production. Moreover there were possible manufacturing irregularities at the Illinois Firestone plant which produced most of the defected tires. Regardless of whatever the weaknesses or flaws were there, it was almost clear that the stability problems in the Ford Explorer were the main reason for the deadly accidents (Noggle and Palmer, 2005). Further discoveries reveal that, despite of recognizing the risks to the consumers, Ford deliberately decided not to stick to its own design goals (i.e. expanding the wheel base and/or lowering the center of

COMM351 Essay

Danial Munsoor 3259882

gravity) so as to save money (Rowell, 2008). According to NHTSAs database there were 3500 reports on tire failures, 13% were of Ford Explorers rollover due to tire failure compared to 3% for all other SUVs and light trucks (Noggle and Palmer, 2005).

FORD AND FIRESTONE REACT:

As the number of accidents grew and the public got to know of the problems associated with Firestone equipped Explorers, Ford and Firestone responded by blaming each other. Masatoshi Ono, the CEO of Firestone completely denied that the tires were defective or that the company was responsible for the accidents. However, Firestone tried to put the blame on Ford for recommending a very low inflation pressure, and it also stressed on the poor tire maintenance by customers. On the other hand, Fords CEO at that time, Jacques Nasser, portrayed from the starting that the problem was mainly due to Firestones tires. He forcefully declared that the accidents were not due to the auto-maker by stating that this is a Firestone tire issue, not a vehicle issue (Noggle and Palmer, 2005). However, this statement of Nassers proved to be the turning point and thus requires closer examination.

FORDS CEO MAKES THE WRONG STATEMENT:

Nassers statement that its a tire problem and not a vehicle problem portrayed that the Firestone ATX tires were a distinct product and not a component of the Ford Explorers. Its like saying that brake problem is not a vehicle problem since a brake problem is very much a vehicle problem. It is important to consider the fact that Ford went ahead than just simply selling Firestone ATX tires. It forcefully modified the specifications that Firestone originally used in designing the tires. Moreover it also determined the air pressure which was at the lower end of the safety margin (Noggle and Palmer, 2005).

COMM351 Essay

Danial Munsoor 3259882

MANUFACTURER OR SELLER: THE MORAL DIMENSION

By nature, we are likely to place greater moral responsibility for the faults in a product on its manufacturer (often called assembler) rather than on its seller. However this perception is the key to understanding moral responsibility (Noggle and Palmer, 2005).

Utilitarian

approach

to

moral

responsibility

requires

placing

moral

responsibility where it will do the greatest good. Generally it means locating responsibility at that point from where the significant effects of harmful behavior can be reduced without harming the society. According to the utilitarian approach, the manufacturer of the product should be held responsible for the defects rather than the retailer. Therefore it is the duty of every producer to ensure that it delivers the safest products (Noggle and Palmer, 2005). Based on the Utilitarian approach, it can be said that Ford was unethical because it was controlling the process through which Explorer was produced, and therefore it is to be held morally as well as legally responsible for the defects which were present in the vehicle

The legal issue in this Firestone-Ford controversy is so tightly linked that it is impossible to discuss one without discussing the other. Without doubt it is the legal liability of the manufacturer of the product that comprises of various components manufactured by other companies. Even if the component made by the part maker contains a defect, the manufacturer of the product can be held partially responsible if the accidents occur due to that defected part because the component is a part of the product. As far as the legal liability is concerned, Ford was legally responsible for the tragic accidents which took place due to tire blowouts (Noggle and Palmer, 2005).

MORAL AND LEGAL RESPONSIBILITY FOR COMPONENT PARTS:

Perhaps the determination of Fords moral and legal responsibility depends partly on whether the tires were seen a separate product bundled with Explorer or as

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Danial Munsoor 3259882

a part of the vehicle. If the former is considered then Ford only transferred the hazard from one buyer to another. However if the latter is considered then Ford, as a manufacturer of the Explorer which includes the tires, not only transferred but also helped in producing the hazard (Noggle and Palmer, 2005).

FORD IS RESPONSIBLE AND NOT FIRESTONE: A DEEPER ANALYSIS

When thousands of parts came into a Ford assembly plant, Firestone tires were also like those other components that were acquired by Ford. Therefore it can be presumed that the tires were manufactured in a manner to suit the Ford specifications, and they did become a part of the assembly process. Actually tires are the same as gas tank, air bags, brakes, steering and windshield. At the time of assembly Ford should have checked that whether the tires were of the same high quality as other components. However, the only difference between the tires and other components was that the tires were covered up under a warranty which was provided by Firestone and not Ford (Hoyer, 2001).

BMW REACTS IMMIDIATELY AS COMPARED TO FORD:

Comparing Ford with the German automaker BMW AG, BMW immediately recalled 200,000 of its cars, after getting to know that there was a problem with the front passenger seat airbags. According to NHTSA, the recall campaign covers 2004-2006 5 Series, 2004-2006 X3 and 2006 3 series (Tutor, 2008). Apparently the problem was that small cracks used to develop in the seat detection mat which used to deactivate the front passenger air bags. However, if the seat detection mat fails to sense a person, it deactivates the airbags. A BMW spokesperson Tom Plucinsky further mentioned that due to small cracks the air bag light used to indicate a deactivated air bag even if the passenger was sitting. BMW responded to the problem by firstly extending the warranty to 10 years for the above mentioned vehicles without any mileage limit. And secondly it replaced the detection mats for the customer free of charge (Raia, 2008). By performing this ethical act, BMW prevented disastrous accidents from taking place.

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Danial Munsoor 3259882

CONCLUSION:
In conclusion, Ford is the one to be blamed for the accidents because it did not adopt proper measures to address the stability problems which were associated to the Ford Explorer. Instead of taking the moral and legal responsibility to fix the problem, it just pointed out fingers.

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Danial Munsoor 3259882

REFERENCES:

Frontenac.

(2009),

The

Model

Ford,

Frontenac,

Available:

http://www.modelt.ca/background.html [Accessed 28 October, 2009]. Hoyer, R. (2001), Why quality gets an F , Proquest, Available:

http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=3&did=83789090&S rchMode=2&sid=35&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQ D&TS=1257632310&clientId=20901 [Accessed 17 October, 2009]. Raia, J. (2008), BMW Recalls 200,000 Cars With Potential Air Bag Problems, The weekly driver, Available:

http://www.theweeklydriver.com/articles/1280/1/BMW-Recalls-200000-Cars-WithPotential-Air-Bag-Problems/Page1.html [Accessed 20 October, 2009] Robert Noggle, & Daniel E. Palmer. (2005), Radials, Rollovers and

Responsibility: An Examination of the Ford-Firestone Case, Journal of Business Ethics, [online], Volume 2, No. 56. Available:

http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=0&did=796936741& SrchMode=2&sid=35&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=P QD&TS=1257632310&clientId=20901, [Accessed 25 October, 2009]. Rowell, J. (n.d), The ford explorer: History repeats itself, Cdrb, Available: http://www.cdrb-law.com/legal-articles/ford-explorer-history-repeats-itself-john-drowell.pdf [Accessed 24 October, 2009]. Tutor, C. (2008), BMW recalls 200,000 vehicles over issue with front passenger air bag, Autoblog, Available: http://www.autoblog.com/2008/08/13/bmw-recalls200-000-vehicles-over-issue-with-front-passenger-air/ [Accessed 28 October, 2009]. Verschoor, C. (2000), Legal compliance and ethical blunders at Ford/Firestone, Proquest, Vol.82, pp22, Available:

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http://proquest.umi.com.ezproxy.uow.edu.au/pqdweb?index=5&did=62518256&S rchMode=2&sid=35&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQ D&TS=1257632310&clientId=20901 [Accessed 3 November, 2009]

White, M. (2008), A definition for business ethics, Business, Available: http://business.lovetoknow.com/wiki/A_Definition_for_Business_Ethics [Accessed 1 November, 2009].

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