Journal 7:  ANALYSIS ON THE FORD-FIRESTONE CASE: TIRE RECALL

My group was asked to do an analysis on the ford-firestone case. Its kind of hard again for us to create an analysis like this since we are all now focused on our finance and accounting subject and grew past our management principles knowledge. But its good to refresh our minds with all the frameworks again and come up with decisions analysis and learning points. We finished almost 1 am doing this paper.

CASE BACKGROUND:

•200 deaths in the US due to cars rolling over

•60 deaths in Venezuela

•14 deaths in Saudi Arabia

•Tread separation a possible cause of the cars to rolling over

HISTORY OF THE TWO COMPANIES

•Partners dating back to 1895

•First contract established in 1906

•Martha Firestone, Harvey’s granddaughter, married William Clay Ford, Ford’s grandson

THE BLAME GAME – FIRESTONE

•In 2001, Firestone issued a report blaming the Explores design for all of the accidents

•Any tread separation would have caused the accident

•The tread separation claims occurred ten times more frequently on Ford’s Explorer than on Ford’s Ranger, a pickup

THE BLAME GAME – FORD

•In 2001, Ford gave the NHTSA a report blaming Firestone for manufacturing flaws

•The Explorer had ranked among the top in terms of safety among the 12 SUVs tested for 10 years

•For the much of the time the Explorer ranked high in safety, Goodyear tires were used

•Rangers are taken on long distance trip where the tires could get too hot

WHO IS AT FAULT?

•Ford recommended a low inflation level for the tires, which causes greater heat build up

•Ford chose to use grade C Firestone tires instead of more heat resistant tires such as grade B

•Firestone had been linked to tire failure, most manufactured from a plant in Illinois

DRIVERS AT FAULT?

•Not being aware of their tires inflation levels

•Driving too fast over long periods of time

•Not knowing how to handle tire blowouts

THE CONSEQUENCES

•Ford reported it would triple its initial recall, costing over $2.8 billion

•In 2001, Ford Explorer sales decreased dramatically

•Ford reported its first loss in operations since 1992

•Firestone’s earnings dropped 80 percent in 2000

•A net loss $510 million, largely due to $750 million in legal expenses

STATEMENT OF THE PROBLEM

How should Ford and Firestone address bad reputation and decline in profits while ensuring customers safety in every car they sell?

OBJECTIVES

•For Ford to create a supply chain management

•For Firestone and Ford to test tires and model designs on actual car models not mules

•Increase ethical considerations before releasing products

PEST ANALYSIS

PORTER'S FIVE FORCES ANALYSIS

SWOT ANALYSIS

ALTERNATIVE COURSES OF ACTIONS

1. Review and change current end to end process of supply change management

•PROS- close monitoring of quality assurance and internal auditing will minimizes production errors and increase product quality.

•CONS- more costly on the part of the company

2. Test actual car models and tires prior to release in the market

•PROS- tests insures improvements on defective products and ensures safety to consumers

•CONS- more costly and time consuming on the part of the company

3. Follow standard ethical principles and considerations as a core value of both companies 

•Utilitarianism- continues to practice an action or decision that is the only right one to perform for the benefits of the stakeholders over the total consequences and cost implications in the company (Review and change current end to end process of supply change management & Test actual car models and tires prior to release in the market).

•Rights- both companies must comply to all basic rights of every individual based on ethics system primarily the rights to live, thus respecting every individual’s rights that can be legal in nature, or pertain to human rights or moral rights (Simply the liberty to own a car without compromising safety of the consumers).

•Justice and Fairness - Continues to find immediate solution to problems for the benefits of the consumers and offer each person what he or she deserves by giving them practical options based on their desires and requirements.

RECOMMENDATION:

For Ford and Firestone:

•The recommendation of the group is to strengthen model unit tests, quality assurance and internal auditing of end to end manufacturing and retail process.

•Follow standard ethical considerations defined in the ACA.

•Be responsible and replace defective products.

For Government

•Pass standard bills with regard to quality of products because it affects public interest.

•Be proactive in investigating causes of accidents even if it is small in number.

•Closely monitor companies’ compliance to standard process and specifications set.

•Innovate process and product.

ACTION PLAN:

•Create a value chain management

•Thorough product testing

•Create an internal audit team

•Create a quality assurance team

•Thoroughly investigate suspicions and complaints on safety

•Strengthen and support crisis management team

•Be proactive in the after sales process of products to maintain good reputation to consumers

•For government regulating body to actively regulate

LEARNING POINTS:

•Complacency and reluctance to standard procedures in the business process may directly affect a company’s performance and market share.

•Businesses must ensure law abidance and guard against liability suits.

•If you don’t do it for ethical or moral reasons do it because it make good business sense