Bridgestone Tallies Impact of Recall,
Now Putting the Cost at $450 Million

By TODD ZAUN, KANJI ISHIBASHI, and TIMOTHY AEPPEL
Staff Reporters of THE WALL STREET JOURNAL

TOKYO -- Retail sales of Firestone-brand tires plunged 40% in the U.S. in September and October, Bridgestone Corp. President Yoichiro Kaizaki said, offering one of the most vivid signs yet of how the company's mass tire recall is delivering a huge blow to the Firestone brand.

Bridgestone, the parent of U.S.-based Bridgestone/Firestone Inc., is scrambling to restore its tarnished U.S. operation, once a crown jewel of the Japanese tire giant. Firestone's top management has been replaced, with an American elevated as chief executive and assisted by a group of top Japanese executives who have been brought to the unit's Nashville, Tenn., headquarters to fix technical problems and upgrade factories.

Bridgestone is still tallying the impact of the recall. Mr. Kaizaki said the company raised its estimate of the cost of the recall by $100 million. The company now expects the recall to cost $450 million.

While Bridgestone is fighting to save its Firestone brand in the U.S., these new figures underscore how tough that effort is going to be. In August, Bridgestone/Firestone recalled 6.5 million ATX, ATXII and Wilderness AT tires after reports of tread separation. The failures of those tires are allegedly linked to 119 deaths in the U.S. and more than 40 overseas, involving accidents mainly on Ford Motor Co.'s Explorer sports-utility vehicle.

Sales of Firestone replacement tires for cars and light trucks fell about 40% in the two months following the recall announcement, compared with the year-earlier period, Mr. Kaizaki said. Exports to the Middle East also dropped off.

Firestone's overall tire sales, however, fell less than 10% during the same period as increased sales of Bridgestone-brand tires and other models offset the decline in the Firestone brand, Mr. Kaizaki said. Mr. Kaizaki didn't say how much the lost sales cost the company.

Bridgestone/Firestone has replaced five million tires in the U.S., about 77% of those subject to the recall.

Last week, Firestone said its internal analysis of the failed tires, which is still under way, has found significantly more problems with one line of its recalled tires and that failures occur most often on the left rear, indicating some connection with the design of the vehicle. Firestone and Ford have clashed over the recall, with Ford maintaining that the tire failures have nothing to do with the Explorer's design.

Establishing what went wrong with the tires is vital for the company in trying to assure U.S. consumers that the problem can and will be corrected. John T. Lampe, the recently anointed Firestone CEO, said: "Based on the company's review to date, our technical teams believe the performance issue with the tire ultimately will be the cumulative effect of tire design, tire components and the interaction of the tire with the vehicle."

Firestone's U.S. tire dealers also are looking for answers about what caused the failures. Without knowing a root cause, they find it difficult to counter public perceptions that all of their tires have quality problems. At the company's recent annual dealer meeting in Las Vegas, Firestone promised to pour money into advertising campaigns and other efforts to restore the brand name.

"They say they're going to improve the technology through bringing in the people from Japan," says Russell Burr, co-owner of Topline Tire & Auto Centers in Florida, a six-store chain, who attended the Las Vegas meeting. "So it sounds like they're planning to Bridgestone-ize the brand a little bit." Bridgestone is considered the company's premium brand name.

Bridgestone Executive Vice President Tadakazu Harada said Friday that Bridgestone hopes to isolate the root cause of accidents linked to the tires as soon as possible.

Mr. Kaizaki said the company was still assessing the total impact of the recall on Bridgestone's earnings, but the crisis already has taken a huge toll on the company's stock price. Bridgestone's shares fell 1% on Friday to 1,105 yen ($10.29). The stock has lost half its value since just before the recall was announced in early August.