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Published on September 9, 2002

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Date Published September 9, 2002

August 2000-Bridgestone/Firestone announces a voluntary recall of 14.4 million Firestone Wilderness AT, ATX and ATX II tires, braces for a billion-dollar loss for the fiscal year and refutes predictions of the imminent death of the Firestone brand.

August 2002-Bridgestone/Firestone announces first-half operating earnings of $54 million and a 12-percent jump in sales, including a healthy rebound in Firestone-brand sales.

In the two years since BFS found itself mired in the Wilderness recall, the manufacturer has undergone major changes to boost and realign its organization.

The company established and strengthened lines of communication with dealers, developed new products and reorganized its information and data systems, making it more confident in its business.

``And right now, I honestly think there isn't one thing that we are doing wrong,'' said John Gamauf, Bridgestone/Firestone vice president of consumer dealer sales. ``We've challenged our customers, we've looked for business, and we are constantly challenging ourselves and trying to take ourselves to another level.''

Bridgestone/Firestone's steadfast optimism has trickled down from the top, Gamauf said, where John Lampe serves as chairman, president and CEO of Bridgestone/Firestone Americas Holding Inc., and the head of Bridgestone/Firestone North America Tire L.L.C., a position he took over in December 2001.

``It started with Lampe and came all the way down,'' Gamauf said. ``We didn't have anything to hide.''

The company's current enthusiasm comes after radical changes, some that were quite painful, Lampe said.

``One of the changes we did last year to align our capacity with our demand is that we had to close our Decatur (Ill.) facility,'' he said. ``I still don't feel good about that. I feel terrible about that. It's 1,800 people who were part of our family that aren't anymore and are now out trying to find jobs anywhere close to what they had with us. And it's still not any easier than it was then when I think about it, but I still know that we made the right decision. If I had to make the decision again, I would make it because we had to take drastic steps to get our company back on solid ground.''

New products

Bridgestone/Firestone has done a lot in the past year to invest in its business and improve performance, Lampe said.

``But the loyalty of our people-the people who work in our stores and offices-has been the reason our business stabilized and is turning around,'' he said. ``But beyond that, we believe that our customers deserve to have new and exciting products with good technology, and we will continue to invest in that.''

On the Bridgestone side, the firm unveiled its Turanza LS line in 2002, and its Revo brand line for the light truck tire segment. The company introduced its Affinity LH line and the Indy 500 tire on the Firestone end, ``which has been a huge success,'' Lampe said. ``We knew it was going to be good, but we never dreamed that it was going to be this good.''

The same could be said for the support the company received from its dealers and customers, according to Lampe.

``When so-called experts-who didn't know us, our company, our dealers or our brand-were telling us that it wasn't going to survive, we never faltered,'' he said. ``We're committed to the brand. We have some dealers that have been with us for 80 years, and they weren't going to give up. They are not going to let it go to the wayside.''

Dealer support

Sam Forbes, president of Denver-based Peerless Tyre Co., which stocks mostly Bridgestone and associate brand tires, said his business hasn't felt a lot of fallout from the recall during the last two years. Peerless ranks among the top 20 of the largest Bridgestone/Firestone dealerships in the country, he said.

While business has remained strong, customers haven't wanted to deal with all of the ``hoopla'' surrounding the recall. ``Consumers don't want to be concerned about that stuff and over the long term that is not going to change,'' Forbes said.

While Bridgestone/Firestone continued to strengthen its connection to dealers and customers, the firm was able to reach out and gain 335 new dealers since the recall, said Bill Pace, manager of the company's TireStarz USA program. TireStarz was set up to help small retailers to compete in the marketplace, while committing to selling Bridgestone, Firestone and associate brand tires.

``And if you think about that, that is over 300 independent, normally small dealers that have decided to cast their lot with us and sell and market our brands and align themselves with our company,'' Lampe said. ``To me that is a tremendous sign of confidence in our firm and in the brand.''

The support received from dealers was complemented by backing from the racing community, including support from Indianapolis 500 Speedway owner Tony George. Firestone is the sole supplier to Indy-style racing in the U.S.

And during the last year, racing star Mario Andretti, who has appeared in company advertising, accompanied Gamauf to speaking engagements around the country, where the two talked to more than 4,000 dealers about the company and its tire brands.

Lampe said Gamauf has been saying for years that people buy from people and that relationships are important. ``And I think we felt the same way but I don't think we ever began to realize how important that philosophy-people buy from people-would mean to us until we got into the situation we were in and had so much tremendous loyalty,'' he said.

Brand breakdown

Bridgestone/Firestone also has pumped up its effort to promote the Firestone brand via consumer advertising.

``We did quite a bit of that at the beginning (of the recall) and we will continue to do that,'' Lampe said. ``We run Firestone Firehawk racing ads before every major race, promoting the Firestone Firehawks. We've introduced some new products, and we have the commitment from the Indianapolis 500.''

The firm has had to balance its promotion of the Firestone brand with its exposure of the Bridgestone brand, and work double duty with both names, the executive said.

``We started promoting the Bridgestone name back in 1999. This isn't something that just came after 2000 (the recall),'' Lampe said. ``Would I sit here and tell you that we didn't double our efforts and that we didn't try harder to promote the Bridgestone brand (after the recall)? No.''

In 1999, the Bridgestone brand represented 30 percent of BFS' major brand business. In 2001, it was 46 percent, and this year the brand will represent more than half of the company's business.

Results improving

In the company's first-half results, reported June 30, Bridgestone brand sales increased 30 percent over last year.

``I talked to one of the dealers in the Northeast today and his Bridgestone sales are up 80 percent this year over last year, and his Firestone business is up 20,'' Lampe said.

The company's financial outlook for the remainder of the year also is positive, and analysts agree the rest of 2002 looks strong. Bridgestone/Firestone's forecast calls for generating operating earnings of $135 million, higher than the original prediction of $125 million.

``I don't have any crystal ball about the economy. It always worries me,'' Lampe said. ``But consumer confidence has been pretty high, and I think that's what has kept the economy going to where it's been.''

An Aug. 12 Morgan Stanley Dean Witter report agreed, stating U.S. tire sales have been stronger than expected, with the Bridgestone brand seeing strong replacement tire sales and the Firestone brand not declining as much as expected.

``Simply put, Bridgestone devised a plan and executed it, and got the bad news out of the papers,'' said Steve Girsky, automotive analyst at Morgan Stanley. ``Bridgestone tires always had a good reputation, and the company was able to fill the pipeline with sufficient units to satisfy dealers.''

Firestone brand sales and earnings in Asia are doing better than expected, with a capacity utilization rate of more than 90 percent. Bridgestone/Firestone Americas' earnings are on the mend, the Morgan Stanley Dean Witter report said, and about 700 recall-related suits have been settled, consuming about $660 million of a $1 billion reserve set aside. Remaining cases that haven't been settled shouldn't cost the firm more than the $400 million balance of reserves for that purpose.

BFS so far has avoided any jury decision in the lawsuits against it, settling every case. Only a handful have even gone to trial. However, Lampe said BFS won't necessarily settle for the sake of settling. ``We want to settle cases that are the right thing to do for us and for the other people involved,'' Lampe said. ``There are a lot of cases where there was no trial incident, nothing was wrong with the tire whatsoever, but we were brought in because there was an accident.''

The recall taught the company to do business very differently, Lampe said.

``We're a different organization completely,'' he said. ``We've got a lot more specialized focus on the different parts of this business.

``One of the issues we had, and admitted to, was that we had a lot of data for the Wilderness ATX but we didn't have a lot of information. It was scattered in all different places. We've done a lot to improve that.''

Bruce Davis, Rubber & Plastics News staff, contributed to this report.

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