Week of October 2, 2000

DC’S GALE TO LEAVE DaimlerChrysler design chief Thomas Gale, 57, will resign at the end of this year. Gale is known to be one of the driving forces of Chrysler's strong performance in the 1990s, through innovative, sometimes risk-taking, designs that he oversaw such as the Dodge Viper, Dodge Dakota pickups, and also the cab-forward design concept. In recent years, Gale has served more of a managerial role at the company, also serving on the DaimlerChrysler management board. Trevor Creed, currently a senior vice president, will be Chrysler's new design chief. Gale started working for Chrysler in 1967.

FORD MAY PHASE FIRESTONE OUT Ford plans to give buyers of the upcoming 2002 Ford Explorer the option to choose tires from Michelin, Goodyear, or Bridgestone Firestone, according to Bloomberg News. Although Firestone has been the leading tire supplier for Ford for years, the tiremaker may be effectively phased out of business with Ford. Citing friction in public statements between the two companies regarding the recall of 6.5 million light-truck tires in August, industry experts are predicting that the move for Ford to offer a customer choice is a possible way to get around contractual obligations with Firestone. Although Ford hasn't decided to phase out or end the supplier relationship with Firestone, it’s likely that Michelin will supply the majority of tires for the Explorer, other sources say. Prior to the recall, Ford had anticipated using both of the suppliers nearly equally.

FORD RAISES PRESSURE Ford Motor Company has officially raised its recommended tire inflation pressure for Firestone tires on Ford Explorers to 30 psi, from 26 psi, mostly to agree with Firestone's recommendation that a higher pressure is safer. When the recall was originally issued, Firestone agreed that the tires should be inflated to between 26 and 30 psi, but recently the tiremaker has said that 30 psi is recommended, while Ford has continued to say that 26 is fine. In U.S. House hearings earlier this week, Firestone blamed some of the tire problems on underinflation, and stated that lower pressures may have contributed to the problem. Ford and Bridgestone Firestone had originally agreed on the 26 psi recommendation for the best vehicle stability and ride. Ford has said that recommended tire pressure still doesn't account for the cause of tread separation in the tires, and why, for instance, the automaker hadn't encountered similar problems with rival Goodyear tires.

TIRE ACCIDENT ANALYSIS ADDS DOUBT A USA Today analysis of the National Highway Traffic Safety Administration (NHTSA) complaints database has shown that about 75 percent of reported failures of Firestone light-truck tires did not involve tires that have been recalled. Although there is a possibility that some of the NHTSA data may be erroneous, only about one-fourth of the cases involved tires covered by the August 9 recall of 6.5 million Wilderness AT and ATX tires. Firestone continues to attest that the tires not recalled have a superior performance record, although consumer-safety advocates are asking that all tires with similar manufacturing processes be recalled.

RECALL HAS FORD SHAREHOLDERS RED Ford Motor Company shareholders have filed a lawsuit against the company for lost share value, claiming that Ford did properly disclose the fact that Explorers had a high frequency of tire failures. The shareholders say that from March 1999 until September 6, Ford had made false statements regarding the tire failures. If the legal action is taken as a class-action suit, all Ford shareholders may be affected by the outcome.

FIRESTONE SUSPECTED FORD IN VENEZUELA A document supplied to Congress shows that in May, three months before Firestone's massive recall of light-truck tires in the U.S., officials at Firestone's Venezuelan office concluded that Explorer accidents were caused by a design failure in the suspension and not by Firestone tires, says USA Today. Firestone officials also cited the propensity of the Explorer to roll over in tire failure, regardless of what brand of tires. However, Ford continues to point to documents that show a much higher rate of tread separation and failure of the tires on other vehicles.

SAUDI ARABIA BANS FIRESTONE Saudi Arabia has banned the sale of all Firestone tires in the country, due to a number of fatal accidents linked to the tires and involving Ford Motor Company vehicles. Bridgestone Firestone, which calls the action extreme, says that the Saudi Arabian Standards Organization issued a ban on the importation of the tires. In August 1999, Firestone replaced the tires on 6800 Explorers due to alleged defects that would lead to failure in high-temperature conditions. Bridgestone has appealed to officials of the World Trade Organization to see if such a move should be permitted.

DAEWOO STARTS TAB WITH EMPLOYEES Daewoo Motor, nearly out of operating funds, is delaying payment on some employees' salaries until the company receives funds from lenders or adequate car sales. Daewoo is in dire straits since Ford's recent decision to pull out of negotiations for a bid of nearly $7 billion to buy the Korean automaker. Although assembly workers will not yet be affected by the pay delay, about 5400 office workers will be immediately.

DC HAS NO INTEREST IN DAEWOO DaimlerChrysler's management board chairman Juergen Hubbert told the Wall Street Journal that the company has no interest in taking a stake of Korea's Daewoo. That leaves General Motors, which still has not made a decision on a bid yet, although officials have expressed strong interest. Daewoo creditors, hoping for a bid to counter that expected from GM, have said recently that they may be willing to "part out" Daewoo in order to avert more losses.

NHTSA BROADENS SATURN PROBE The National Highway Traffic Safety Administration (NHTSA) has opened an investigation into Saturn whether a previous recall of specific vehicles is broad enough. Saturn last year recalled about 136,300 Saturn vehicles from model years 1994 and 1995 for defective seat recliners that can suddenly collapse. The NHTSA now wants to examine others, about 400,000 cars not recalled but from the same model years, for which there have been more than 300 complaints. The agency describes the failures as similar to that in the rest of the recalled cars.

ICAHN CALLS GM MANIPULATIVE Investor Carl Icahn has lost interest in General Motors, and he accuses the company of manipulating investors by revealing his intentions to purchase company stock before it was certain. Icahn, who was likely interested in General Motors for its burgeoning Hughes Electronics unit, reportedly sold his $15-million stake in GM last week. GM claims that it publicized the interest only to comply with securities laws.

COVISINT READY TO GO Covisint, the online business exchange led by General Motors, Ford, and DaimlerChrysler, has been given the final German regulatory approval needed to start business. Covisint will cut procurement costs by allowing companies to buy and sell online and easily track inventories in real time. The exchange tested out some features last week, and it goes live this week. Officials expect Covisint to facilitate nearly all purchases for GM, Ford, DC, and also Renault and Nissan.

DC WILL POST Q3 LOSS DaimlerChrysler, faced with heavy competition and a tepid market, has revealed that it will likely post a loss for the third quarter. The company is expected to post a loss of about $530 million in the third quarter, although it will still profit over the whole year. DC says that recent cost-cutting measures should help increase profitability, although several new product introductions have influenced the company to spend more than usual on marketing.

VERIZON SUPPORTS CELLPHONE RULES Cellphone giant Verizon Wireless has broken the industry position and moved to support some recent government initiatives to restrict the use of cellphones while driving. Verizon said that it will back state laws requiring hands-free equipment for calls made while driving. Rival wireless companies refuse to jump on the bandwagon with Verizon, saying that it shouldn't be regulated, and that all the statistics aren't in yet. The Cellular Telecommunications Industry Association says that more than 100 million Americans use cellphones.

TRUCKER-SAFETY RULES DELAYED Highway safety advocates are upset that new federal rules limiting how long truckers can stay on the road will now be delayed by a year or more, due to a halt in congressional negotiations that incorporate the transportation bill. The delay will enable the Transportation Department to gather more data on how to revise the trucking rules. Truckers are contesting the new rules, saying that they are impractical and will not work in the real world. The new rules would require 12 hours of allowable driving time per day, versus 16 hours allowed by the current rules. Safety advocates and the Transportation Department say that longer hours on the road result in compromised safety to other motorists.

HONDA UNVEILS FUEL-CELL CAR Honda announced that it intends to start testing a new fuel-cell car on California roads in November. The small, two-door hatchback, initially called FCX-V3, is the first of a new breed of cars to be offered as part of the California Fuel Cell Partnership, a state requirement encouraging mass-production zero-emissions vehicles for sale by 2003. Honda says that it will try to bring a production version to market by then.