The Firestone Fiasco: Crisis Managers Tell What They'd Do

With each day seeming to bring new and damning discoveries in the Firestone tire debacle, crisis management experts watch the unfolding drama with a jaundiced eye. “It’s the perfect example of how not to handle a corporate crisis,” said Lanny J. Davis, former special counsel to President Clinton, who heads the legal crisis management practice group at Washington, D.C.’s Patton Boggs LLP. Bridgestone/Firestone Inc. and Ford Motor Co. found themselves blinking into the klieg lights on Aug. 9, when Firestone announced the recall of 6.5 million tires for tread separation problems allegedly linked to 101 deaths and 400 injuries in the United States. Most of the recalled tires were mounted on Ford’s most popular sport utility vehicle, the Explorer, and both its design and Ford’s recommended tire pressure for the vehicle have been implicated. The companies appeared to be caught with their pants down, unprepared for the magnitude of the media frenzy and public outrage that followed the announcement. Crisis management experts agree that Ford has outshone Firestone in its crisis-mitigation efforts, but both have lost credibility by bouts of finger-pointing and media and congressional speculation into who knew what when. “The key to damage control is to avoid speculation and get the facts out,” Davis said. Neither company did this, he added. Instead, they handed control of the facts over to Congress, which has been regularly dribbling out damaging facts throughout the course of its investigation. A steady trickle of bad facts exacerbates a crisis, Davis said, “by not only making it a bigger, multi-day story, but also a cover-up story.” “If there is any bad news in any file cabinet, it will come out,” he added. Ford spokeswoman Susan Krusel disagreed. “We are trying to do everything we possibly can to get accurate information out to our customers,” she said, explaining that Ford has put informational messages in print and on national television and dedicated a Web site to the recall, and is sending letters to all unaffected customers. She added that the single biggest challenge Ford has faced is the fact that “a few plaintiffs’ lawyers” have been misleadingly sending single pages of multi-page documents to the media. “There’s been a lot of misreporting of facts,” Krusel said. Bridgestone/Firestone, which did not return a phone call seeking comment, has said publicly that the critics are not taking into account that it has put out ads, expanded the information on its Web site and the hours of its consumer hotline, and is doing everything possible to provide replacement tires. BACKED INTO A CORNER Ford, which has insisted since the onset that “this is a Firestone tire issue, not a vehicle issue,” has found itself increasingly backed into a corner, as documents released by Congress indicated that the auto maker permitted a narrower margin of safety on its Explorers than on other Ford vehicles. Documents also showed that Ford and Firestone have disagreed since 1991 about the correct tire pressure for the Explorer, with Ford advocating a lower pressure, which reduces the risk of rollovers a problem with the Explorer but increases the risk of tire disintegration. The feud over tire pressure came to a head on Sept. 21, when Firestone’s chairman wrote to Ford urging it to boost the recommended tire pressure on the Explorer to 30 psi “in the interest of safety.” The next day, Ford capitulated, recommending that Explorer owners increase their tire pressure “to help eliminate customer confusion.” For its part, Firestone is finding it hard to stand by its statement that its safety staff only became aware of a problem in early August, just before the recall. Documents confirmed that Firestone and Ford knew treads were peeling off Explorers in Saudi Arabia and Venezuela at least by last summer. And Firestone warned Ford against replacing tires in these markets because they might then be required to alert U.S. regulators. Ford quietly went ahead anyway, replacing 40,000 to 60,000 Firestone tires with heavier duty Goodyear tires in August of last year. The result of this incremental release of information is that both companies appear to be involved in a cover-up. “It’s the classic Watergate question: what did they know and when did they know it?” said Professor John R. Harrald, who heads the Institute of Crisis Disaster and Risk Management at George Washington University’s School of Engineering and Applied Sciences. Crisis management experts have been equally unimpressed with the companies’ public attempts at assuaging consumer fears, such as Ford’s advertisements in print and on prime time television featuring CEO Jacques A. Nasser pledging that Ford will help fix the problem. “It’s not plausible for Nasser to go on television and say they are doing everything they can” without addressing the question of tire pressure, Davis said. Firestone has fared no better, according to Davis and other experts. Admissions that the company made “bad tires,” and that Bridgestone executives ignored signs of trouble with Firestone tires, go only “half way” in addressing the problem, Davis said. Both companies “need to subject themselves to a press conference at which reporters can ask any question they like,” he said. He also recommended a “document dump” at which every document made available to Congress is put in a reading room for any reporter to read. “That way, all the stories would get written at once, completely and accurately,” Davis said. Another recommended tactic when a corporate crisis hits is to “immediately sit down with key reporters from major newspapers” said Lanny A. Breuer, former special counsel to President Clinton and a partner at Washington, D.C.’s Covington & Burling. “They are going to write the story anyway, so why not sit down with them,” he said. The company will benefit from cultivating relationships with the media, who will be more accessible when the company wishes to talk about what it is doing to fix the problem. In addition to factual fumbling and half-hearted mea culpas, Ford and Firestone have both yielded to image-damaging finger-pointing. As the old saying goes, “when you point the finger, three fingers will point right back at you,” said Richard S. Mannella, counsel at ACE USA Inc. and an authority on crisis management. A company is better served by a message that shows it is concerned about consumer safety and not so much about whose fault it is, Breuer said. Those interviewed agreed that the companies’ responses to the crisis seemed driven by lawyers, whose impulse is to protect the company’s litigation position. “When 60 Minutes is camped outside your door, instinct takes over,” said Edwin Stier, of Skillman, N.J.’s Stier, Anderson & Malone, one of the few law firms devoted exclusively to crisis management. “In those situations, the lawyer’s advice is typically, ‘don’t admit anything to anyone’ ” he added. The strategy has hurt Ford and Firestone, both of which have seen their stocks fall more than 12 percent since the recall was announced. A good crisis management lawyer realizes that, as counterintuitive as it may seem, other considerations need to be balanced against liability concerns, Stier said. “Sometimes you have to take some risk on the liability side in order to restore public confidence in your company,” he added. “Do you face exposure now as an honest corporation that has had a problem, or down the road as a corporation that is untrustworthy and insensitive to the public interest?” Stier said. Firestone should know better than most the risks of not dealing with a crisis swiftly and openly. Twenty-two years ago, the company faced a nearly identical disaster when it recalled a record 14.5 million tires. The tire maker’s defiant approach to that crisis dubbed “Firestonewalling” by National Highway Traffic Safety Administration investigators nearly led to its downfall. Professor Harrald was not surprised that the company seems to be repeating past mistakes. “Organizational learning doesn’t work as well as organizational forgetting,” he said, “and unless you do drills and exercises, you forget how to handle a crisis situation.” As things stand, “I wouldn’t be surprised if it is the end of the Firestone brand,” he added. Crisis management issues aside, one nagging question for many is how a disaster of such magnitude could have been allowed to happen. Not only is the auto industry highly regulated, but the players are sophisticated companies with enormous resources available to research potential problems. According to George Iny, president of the Automobile Protection Association, Canada’s largest non-profit auto industry watchdog, the problem has to do with the flow of information. “There are a number of areas where information should have flowed but didn’t,” he said. First, industry regulators lack a centralized clearinghouse. Although Canadian regulators speak to their U.S. counterparts on an almost daily basis, “apparently nobody speaks to Venezuela or Saudi Arabia,” Iny said. Second, he cites a failure of communication between Ford and Firestone. Since the tires are warranted by Firestone, Ford may not necessarily know about problems that crop up. Third, Iny said, the warranty and adjustments departments that replace the blown tires and the lawyers who handle litigation do not typically share data in a manner that would flag a potential problem. Part of the solution, suggested Carole Basri, in-house counsel at Deloitte & Touche and co-author of “Crisis Management in Corporate Legal Departments,” is a self-regulatory mechanism for the entire auto industry, such as the Better Business Bureau. She also recommended independent auditing for quality control and personal liability for board members and senior executives.