Did Ford Cover Up Defective Tires?

When Lori Lazarus heard about the big Firestone tire recall last month, she was steamed, but not surprised

On Labor day 1996, while driving home from Disney World, a Firestone tire on her Ford Explorer shredded. Her sport utility vehicle flipped into a drainage ditch along the Florida Turnpike, leaving her trapped underwater. She was saved by passing motorists who pulled her from the submerged SUV, but she still suffers from headaches and balance problems.

The 31-year-old teacher is bitter that Ford and Firestone are only now owning up to the problem. "They've known something was wrong for years," says Lazarus, who filed suit against both companies in 1997.

As the tire recall spins out of control, Ford and Bridgestone/Firestone have swung into full damage-control mode. Just a month into one of the biggest tire recalls ever, the companies are under mounting pressure to widen the recall of 6.5 million ATX and Wilderness tires.

Critics want to know if the companies are guilty of a cover-up or simp foot dragging. Federal regulators now suspect that 88 U.S. deaths resulted from accidents caused when the tread peeled away from Firestone tires. They issued a warning on an additional 1.4 million tires Friday.

Congressional hearings will open this week, as lawmakers demand to know what Ford and Firestone knew and when they knew it. Already some congressional investigators poring over thousands of pages of Ford and Firestone documents believe that the companies "could have acted sooner," a source close to the investigation told Newsweek. But Ford chief executive Jacques Nasser insists, "We did not hide anything."

Pressure also is building overseas. Criminal charges are being considered against both companies in Venezuela, where Ford replaced faulty Firestones months before the American recall.

Venezuelan regulators accuse the companies of "a conspiracy against the users of Ford Explorers," which resulted in at least 46 deaths. In an August 31 report, government officials accuse the companies of concealing fatal flaws in the tires to further their "commercial interests." The investigators cite meetings the companies had in 1998 to discuss fixing what the Venezuelan media have dubbed "the assassin tires." Ford and Firestone deny the charges, but acknowledge that they began discussing the tire problem nearly two years ago.

In May, Ford started replacing Firestones on Explorers in Venezuela. But that came too late, contends Venezuelan consumer-protection inspector Jorge Dominguez. "There are horrific cases," he said in Caracas last week. "A man watched his wife die after a part of the bodywork pierced her skull."

With grisly images like that tarnishing their brands, both companies are desperate to contain the damage. For Ford, the Explorer is the goose that lays the golden egg, providing one quarter of its profits. And for Firestone, its entire existence is riding on pulling out of this disaster, analysts say.

Making matters worse is the threat of a strike by 8,000 Firestone workers. Both companies are airing their own commercials to reassure consumers. Looking earnest and somber, Nasser pledges in prime-time commercials to work "around the clock" to resolve the crisis.

But off-camera, the companies are pointing fingers at each other. After initially standing by his supplier, Nasser last week placed blame on Firestone, saying: "This is about defective tires."

Evidence is mounting that Ford and Firestone knew about peeling-tire-tread problems for years. Lawsuits against both companies first cropped up in 1991. And documents from those suits have shown that Firestone began reimbursing some consumers for faulty ATX tires beginning in 1989, according to a source familiar with the litigation. A Firestone spokeswoman said those kinds of reimbursements "do not necessarily indicate a trend" of product defects.

By 1997 State Farm insurance adjusters also noticed an apparent pattern of problems with ATX and Wilderness tires and sought, and in a few cases received, reimbursement from Firestone. State Farm shared its data with federal safety regulators in 1998, but the Feds did not open an investigation into the tires for another two years.

Also in1998 Ford noticed Firestone treads unraveling on Explorers in Saudi Arabia, Asia and South America, and last year began replacing tires on nearly 50,000 foreign vehicles. Ford did not reveal its foreign recall to U.S. regulators until May.

Now regulators want more documents from Ford on its oveseas recall. And they are expanding their probe to look at 47 million Firestone tires. With the death toll mounting, the controversy over who knew what when is not likely to ease up soon.

Story courtesy of Newsweek Editor Keith Naughton.