The controversy the surrounds the relations between two companies –Ford and Firestone has raised a lot of arguments and opinions. The facts, the background, and the setback were several of many aspects of the scandal. This essay analyzes the aspects of Ford and the Firestone tire setback along with providing brief personal recommendations on the means that might have been taken to prevent this controversy.
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In 1903 Henry Ford has based on the American automobile company (Ford Motor Company). Originally, the mission of the new company as planned by the founder was a release of inexpensive cars for mass consumption. The Really break-even sales level of the company was so high, that even constant expansion of the Ford enterprise did not help to consult with all orders. Ford Motor Company sells more than 70 various models of cars worldwide, made under the trademarks Ford, Lincoln, Mercury, Jaguar, and Aston Martin, and takes an honorable second place on sales volumes in “the big three” American automobile business.
Firestone has been based in 1900 by the 31-year-old American Harvey S. Firestone in Akron, State of Ohio. Harvey S. Firestone has invented a new way of manufacturing tires and has begun the production, having employed in the newly made company only 12 persons. By 1920 the annual volume of output made already 37 million tires. In 1953 there was the first tubeless tire. Additionally, in 1988 the company has ceased to be independent.
It was bought by Japanese Bridgestone in which Firestone incorporated until now, forming together the largest tire concern in the world. The cooperation of Ford and Firestone began in 1908 when Firestone tires have been chosen by Henry Ford for the car Model T and the surname of the young inventor have been patented as tires’ trademark.
Several accidents involving the Firestone tires and Ford vehicles which are said to have started in 1978 peaking with a large scandal in 2000. Defect of tires has already led to that as a result of failures on roads over thousand persons have suffered include 174 with fatal results.
On August, 9th, 2000 Bridgestone/Firestone and Ford Motor Company declared withdrawal of 6,5 million tires in the USA, having declared that safety of clients — their prime purpose. By estimations of experts, the financial expenses connected with the given decision, have reached $4 billion despite that the rejected Firestone tires were used in all automobile branches, the most notable losses have incurred Ford, the partner most actively using production.
The stock value of Ford Motor Company during the period since August 2000 till June 2001 has decreased from $47.50 to $24.59. Even larger blow has comprehended Bridgestone/Firestone stock which for a similar period has gone down in the price more than twice. A strong blow on corporate reputation and cost of brands became the main threat that both companies have faced. More active actions on status quo restoration were shown by Ford.
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If looking at the last year, following the results of the third quarter company Ford losses in North America have made an order of 1.2 billion dollars and if to consider results of activity of the company worldwide to a deduction of taxes losses Ford reach 1.3 billion dollars, which is almost twice more than the year before. Financial indicators Ford is influenced at once by some factors. First, is the sharp recession of activity in a segment of full-size off-road cars where positions of this mark were always high.
Besides, influence is rendered also by the growth of cost of materials and accessories, growth of expenses for guarantee cases, and also the general reduction of prices on cars. At last, the influence on the financial stability of Ford was rendered by the aforementioned scandals with Firestone which has cost the concern more than 240 million dollars.
The first recommendation that could be made is managerial changes where both companies made a mistake were trying to transfer the fault for the tragical incidents on the partner, both companies have drawn steadfast attention of supervising bodies and lawsuits. As with selling the brands that could be a good idea since the problem could be managed by restructuring the enterprise which along with the new management and a new marketing campaign focused on the safety issues could bring a new breath to the company. It could be added the amount of liquidity allows the restriction process to take place.
If the recommendations about Ford are mostly managerial, the recommendations that could be made for Firestone should be merely technological as no management initiations could solve the problems with the flaws in the technological process.
The reliance on a particular partner for such a long period of more than 100 years is another indicator that in a competitive market the first preference should be made to companies that when cooperated have to bring a better picture of the product. Such a picture in the context of vehicles is mostly framed by safety, thus the largest mistake of both companies is the ignorance of the early signs and complaints that were considered a mere exception. In this case, an early reaction in the future to any safety complaints could bring the customers’ loyalty back.
KUMAR, A. (2001). Firestone cuts deal on bad tires. Web.
Ford Company (2008). About Ford. Web.
Duckers, J. (2003). Ford’s first setback under Mulally. Web.
Bridgestone America (2008). History of the Company. Web.