No winners in Bridgestone-Ford fight

Bridgestone couldn't afford a second recall, literally or figuratively, leading to Watanabe's "excruciating" decision

In this story: Rating agencies pessimistic Public likely to favor Ford Report likely to put both in poor light Second recall too much for Bridgestone RELATED STORIES

By CNN's Alex Frew McMillan in Hong Kong

TOKYO, Japan (CNN) -- Bridgestone Corp. on Wednesday was weighing the cost of the largest tire recall in history.

The Tokyo-based company said it would not take a direct financial hit from Ford Motor Co.'s decision to replace about 13 million of its tires.

It has also downplayed the financial effect of a very public bust-up with Ford.

But the damage, particularly to the Firestone brand, is likely to be long-lasting. Neither Ford nor Bridgestone will come out a victor as the companies point fingers at each other.

"Each company is trying to blame the other. That's why nobody will win," said Kunihiko Shiohara, auto analyst for Goldman Sachs in Japan.

Rating agencies pessimistic

In Tokyo, Bridgestone Corp. stock closed unchanged Wednesday, at 1,268 yen. It had risen earlier in the day as investors bet the worst was behind the company.

Analysts welcomed a more aggressive stance from Bridgestone after its U.S. subsidiary, Bridgestone/Firestone Inc., cut off its 95-year-old business relationship with Ford.

Rating agency Standard & Poor's joined Moody's on Wednesday in downgrading its assessment of Firestone. S&P placed Firestone and its parent on a credit watch with negative implications, saying it could lose market share.

Ford blames defects with Firestone's Wilderness, ATX and ATX II tires for a spate of accidents. Rollover-related crashes are blamed for 174 deaths in the United States alone.

But Bridgestone says Ford's vehicle design is at fault. It refused to recall additional tires, as Ford wanted.

Its president, Shigeo Watanabe, said a second recall would have been a "life or death" matter for Bridgestone/Firestone and the unit couldn't afford it financially.

Public likely to favor Ford

Many analysts fault Bridgestone for being slow to respond when tread separations first surfaced with its tires. Japanese executives may not at first have appreciated the magnitude of the U.S. problem.

It is widely acknowledged the company has been losing a public-relations war with Ford, which attacked the issue early and often.

Ford said Tuesday it will take the $2.1 billion cost on itself to call in the 13 million tires. They came as standard equipment on Ford's highly popular Explorer sport-utility vehicle.

Tsunemi Tachibana, auto parts analyst for Nikko Salomon Smith Barney, said the public is likely to think Ford is acting more in their interest.

"The consumers will prefer the decision of Ford," he said. Bridgestone believes its data holds up. But tire buyers likely won't care.

"For the users, they don't know the exact quality or technical issues," he said. Overall, he expects them simply to favor buying brands like Goodyear.

Report likely to put both in poor light

But Ford will end up paying higher prices for tires, as well as for the recall. Goodyear said Wednesday it would increase retail prices by 3 percent to 5 percent.

Ford got 43 percent of its tires from Firestone in 2000. It will have to lean heavily on Goodyear, which supplied 23 percent of its tires, and Continental General Tire, which supplied 20 percent.

Both companies are likely to lose when the U.S. National Highway Traffic Safety Administration releases its report, expected by early fall.

"The tire maker tries to explain the fault of the vehicles, and Ford is trying to explain the problem with the tires," Shiohara said. "The fact is it's probably a mixture."

Still, Bridgestone felt it had no choice but to break ties with Ford. Watanabe, the president, called it an "excruciating" decision to end an alliance that dated to the Model T car.

The Japanese company says that will cost it 2 percent of its worldwide sales. The impact will be muted because Bridgestone will keep supplying Ford with existing contracts until 2003.

The company hopes to make up the lost sales with deals with other suppliers. But Bridgestone/Firestone accounts for 40.5 percent, or $7.5 billion, of Bridgestone's worldwide sales of $18.6 billion.

Analysts say the effect of its breakdown with Ford on lucrative replacement sales won't be clear for some time.

Second recall too much for Bridgestone

Bridgestone likely could not afford the admission there was something wrong with all its tires. It had already recalled 6.5 million tires, starting last August, and claimed it had identified the lines with higher failure rates.

The estimated $750 million cost of the recall caused Bridgestone's worst financial performance in a decade last year.

Shiohara at Goldman Sachs said a second recall would have caused a total loss of faith in Bridgestone and in the Firestone brand. Firestone sales have already dropped close to 50 percent.

When Mitsubishi Motors announced two recalls after admitting last year that it systematically covered up product defects, it suffered another 20 percent to 30 percent loss in sales.

The current situation does Bridgestone no favors. At best, analysts say, the Firestone brand stands pat. At worst, it dies.

But the company has clearly calculated lost business is less than the recall cost and another embarrassing public admission.

If neither Bridgestone nor Ford gains from the spat, observers say, perhaps at least consumers will.

Bridgestone faces hefty cost in tire spat
CNNfn Special Report: Firestone recalls
Ford recalls 13 million tires
Firestone dumps Ford
Ford courts 3 tiremakers

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.