Week of September 25, 2000

FORD RESUMES PRODUCTION Ford Motor Company resumed production at three of its light-truck assembly plants that had been held idle for three weeks. Over the idle time, Ford says it rerouted more than 100,000 tires toward recall replacement rather than production. The plants that have been held idle normally produce Ford Ranger and Mazda B-Series pickups and Ford Explorer SUVs. Ford says that the shutdown cost 23,500 Rangers and 15,000 Explorers. Most of the Ranger output can be made up, although Explorer production won't be made up until sometime next year.

NHTSA EXPANDS INVESTIGATION The National Highway Traffic Safety Administration has expanded its probe of Firestone tires to include 47 million similar-design tires made by the tiremaker since 1991, in addition to the 6.5 million already recalled, reports USA Today. The agency also plans to upgrade its investigation of the matter to include its own engineering analysis. Of the similar-model tires, some were sold under different brand names. If the NHTSA's engineering analysis shows the other tires to be defective by design or production methods, then the agency would ask that all 47 million tires be recalled.

FORD AND FIRESTONE CLASH Ford and Firestone have once again exchanged criticisms regarding the recent Firestone tire recall. According to the Detroit News, Ford released a report indicating that Ford Explorers equipped with Firestone tires were about ten times as likely to be involved in a fatal rollover crash than those Explorers equipped with Goodyear tires. Firestone's vice president, John Lampe, responded by criticizing Ford's choice to recommend a lower pressure for the tires. Ford says that both Goodyear and Firestone tires were made to the same specification, and yet there is such a different safety record between the two.

HOUSE HEARING GRILLS FORD, FIRESTONE U.S. Representative Billy Tauzin, the leader of the latest House Commerce subcommittee hearing looking into last month's recall of 6.5 million tires, accused both Ford and Firestone of misleading the public. The House panel looked into reasons why Ford used a converted F-150 pickup to test handling characteristics with the tires, and also requested more missing documents from the automaker. Ford had, earlier in the recall, said that the tire tests had been done on an Explorer. The panel concluded that no one had ever conducted high-speed tests of the Explorer with the Firestone tires inflated to 26 psi as advised. Panel members questioned testing practices of Firestone, while Firestone turned the table to Ford and again said that it had recommended higher pressures for the tires than those advised by Ford. The committee then refocused the attention to Firestone by referring to tests the tiremaker had conducted that indicated a high failure rate in randomly selected tires. Failure of the tires is now linked to 101 deaths, and the NHTSA has since expanded the investigation to about 47 million tires.

ANOTHER HEADACHE FOR BRIDGESTONE Bridgestone Corporation is facing yet another potential problem with defective tires. Owners of high-performance Audi S4 models equipped with Bridgestone Potenza RE040 tires are claiming problems with sidewall bubbles on the tires. The tires, used on 6000 2000-model cars, have not been linked to any accidents although the National Highway Traffic Safety Administration (NHTSA) has received at least twelve complaints regarding the tires.

CONTINENTAL RECALLS 160,000 TIRES Continental General Tire Incorporated has voluntarily recalled about 160,000 tires due to reports of tread separation. The tires, 16-inch ContiTrac models, were featured as standard equipment on about 38,000 1998 and 1999 Lincoln Navigator sport-utility vehicles. Ford and Continental are not aware of any crashes caused by failure of the tires, and both companies have stressed that the recall has been made as a customer-satisfaction issue. The recall is expected to cost Continental about $5 million.

SECOND TIRE RECALL HURTS FORD IMAGE Ford lost even more consumer confidence due to last week's recall of Continental tires on Lincoln Navigators, reports Bloomberg News. According to a survey by CNW marketing research, on September 19, 47 percent of potential buyers rated Ford products below average in overall safety, compared with only 9.6 percent on July 15. On September 14, before the most recent Continental recall, the figure was at 42 percent. Thirty-two percent of potential Navigator buyers said that the recall would affect their buying decision. Continental recalled about 160,000 ContiTrac tires yesterday, mostly installed as original equipment on Lincoln Navigators.

NHTSA INVESTIGATES EXPLORER STEERING The National Highway Traffic Safety Administration has opened an investigation into reports of failure of front stabilizer bars in 1995 and 1996 Ford Explorers. The problem, unrelated to the recent Firestone tire recall, hasn't yet been linked with any accidents or injuries. Breakage of the stabilizer-bar link may cause clumsy handling and noise, says Ford. The investigation was opened after seven of fourteen Explorers brought in for inspection by the NHTSA were found to have broken or missing stabilizer-bar links.

FORD-DAEWOO DEAL COLLAPSES Ford Motor Company has withdrawn interest in Korea's Daewoo Motor. The company issued a statement saying that the deal was deemed "...not in the best interest of Daewoo and Ford..." To expand its Asian-market presence, Ford will likely pursue alternatives with Japan's Mazda Motor Corporation as an alternative to the deal. According to reports, Ford may have withdrawn interest in the Korean automaker partially because of a recent slowing in growth in Asian markets, Daewoo's ageing models, and tremendous debt to creditors. Experts anticipate that General Motors may soon make a bid for an amount far lower than Ford's preliminary bid of $6.9 billion.

DAEWOO OPEN FOR BID AGAIN South Korea's Daewoo Motor has been placed back on the auction block, just days after Ford Motor Company announced a withdrawal of its bid and interest in the Korean automaker. General Motors is highly likely to put forth a joint bid (with Fiat) for Daewoo, and creditors of Daewoo may allow Hyundai to make a bid in order to get a higher price from likely buyers GM and Fiat. The creditors had originally hoped that DaimlerChrysler and Hyundai would submit a joint bid as they had in the first round, however DC announced that the company had no intentions of doing so. The creditor banks of Daewoo said that they would make a decision on any new bids by October 20. Daewoo's creditors also strongly criticized Ford's business ethics for withdrawing from the deal at such a late date.

MITSUBISHI ACCUSED OF FAKING SALES NUMBERS Mitsubishi Motors now faces another scandal—this time in the U.S. Automotive News reports that Mitsubishi's sales arm has been faking sales numbers in order to meet quotas and incentives. The report estimates that as many as 21,000 fake sales could have been included in Mitsubishi's sales earlier this year. Most of the fraudulent sales claims involve vehicles that have been "burned," referring to cars marked as sold sometimes months before they actually are. The potentially fraudulent practice often indicates a false name as the first owner of the vehicle. Mitsubishi buyers are advised to check records and make sure that the purchase date and retail delivery record date match.

DC COURTING CHINESE COMPANIES DaimlerChrysler is hoping to soon establish a partnership in China, says Bloomberg News. The company is reportedly most interested in the commercial-truck market. DC has conducted preliminary talks with several Chinese truckmakers in recent weeks. Within ten years, the commercial-truck market in China is expected to be twice as large as Japan's.

SATURN PAYING EMPLOYEES TO LEAVE General Motors' Saturn Corporation division is offering bonuses to employees who want to leave their jobs. The automaker is faced with slow sales and too many employees with jobs bound under a United Auto Workers' contract. Saturn is reportedly offering some workers up to $25,000 to take leaves of absence, retire, or quit. About 400 of the 6000 Spring Hill, Tennessee, workers are expected to accept the offer. Saturn says that the slump is only temporary, and that the start of production of its upcoming sport-utility vehicle next year will fill the gap.

DC MIGHT BRING SMART TO U.S. According to an Associated Press report, DaimlerChrysler is considering bringing its Smart minicar for sale in the U.S., Japan, and Taiwan. The Smart, a two-seater that's sold in Europe for less than $10,000, has attained somewhat of a cult following since its 1998 introduction. Sources in the report say that a four-seat Smart may be offered in the U.S., although introduction may be delayed by several years because the model would first have to pass a full battery of U.S. crash-test and safety regulations.

BRAZILIAN GOLFS RECALLED Volkswagen has announced a recall of some 2000 and 2001 Brazilian-made Golf models for a possible suspension defect in the control arm. The recall covers 4218 cars in the U.S., 1448 in Canada, and about 28,000 Golfs and Audi A3s worldwide. All of the cars recalled were made in VW's new Parana, Brazil, assembly plant.