Ethics February 21st

Ford/Firestone

background Long History deaths in Saudi Arabia (not reported in US) 2000 first deaths reported in the US Tires recalledrecalled

In December 2000, Firestone blamed Ford –Firestone tires worked fine on Rangers problems were limited to Explorers –SUVs role over easily independent of the tiresSUVsoverindependent In August 2001, Ford blamed Firestone –Goodyear tires work fine May 21 st 2001, Ford and Firestone officially part ways

Wherein lies the blame? Ford –Ford was alone SUV makers in equipping the Explorer with Class C tires versus class B tires To be a class C tire you have to withstand two hours at 50 mph when properly inflated and loaded, plus another 90 minutes at speeds up 85 mph. (The standards were set in 1968) –Class B tires are more heat resistant most Explorer death took place in hot Southern States and hot- climate countries The Good year tires that were used on the Explorer were class B –Ford should have been aware of dangers (perhaps not immediately but certainly after a few years)

Firestone –Early investigations linked deadly vehicle accidents to tire failure, shoddy manufacturing in the Decatur, Illinois plant –Still GM picked Firestone as its supplier of the year for the sixth consecutive time in 2001 Government –Too slow to investigate deaths or to upgrade standards Driver –Neglected tire pressure, too heavy loading, driving too fast for extended periods of time.

Consequences In may of 2001 Ford announced it would triple the size of the Firestone recall—a $2.8 billion prospect, a cost Ford wanted to shift to Firestone At that time Firestone refused to supply the company with more tires. Ford lost market share to foreign rivals, in July of 2001 it reported its first loss from operations since 1992

Ford also faced 200 product liabilities lawsuits involving Explorer rollovers Bridgestone/Firestone faced a more dangerous situation in 2000 earnings dropped 80% Legal expenses were at $750 million and were expected to reach billions of dollars Some analysts doubted Firestone as a brand could survive

Firestone Options Option #1 –Deemphasize firestone and push business to the Bridgestone label Option #2 –Stop using the firestone brand altogether Option #3 –Try to salvage the brand name: “The American Public is quick to forget.”

Postmortem Buyers of Ford Explorers with firestone tires faced higher risks of deaths and injuries for years. The New York times reported that the tire defects were known in Not till three years later did Ford replace tires in Saudi Arabia and not till after television reports on problems did federal regulators and the two manufacturers take it seriously

Ford refused to admit that anything was wrong with its SUV Firestone was slow to clean up defective manufacturing practices in Decatur, Illinois and other plants Minor ethical abuses became major when lives were lost. Still the companies delayed until lawyers were brought in. Then each company tried to blame the other. Throughout this time, saving lives did not apparently have a very high priority.

Group Think The unethical behavior of groups The Abilene paradox

Eight Main Symptoms of Group Think Illusion of Invulnerability: Members ignore obvious danger, take extreme risk, and are overly optimistic. Collective Rationalization: Members discredit and explain away warning contrary to group thinking. Illusion of Morality: Members believe their decisions are morally correct, ignoring the ethical consequences of their decisions. Excessive Stereotyping: The group constructs negative stereotypes of rivals outside the group.

Pressure for Conformity: Members pressure any in the group who express arguments against the group's stereotypes, illusions, or commitments, viewing such opposition as disloyalty. Self-Censorship: Members withhold their dissenting views and counter-arguments. Illusion of Unanimity: Members perceive falsely that everyone agrees with the group's decision; silence is seen as consent. Mindguards: Some members appoint themselves to the role of protecting the group from adverse information that might threaten group complacency.

Examples The most famous example of Groupthink is the presidential advisory group who almost led Kennedy into invading Cuba and potential nuclear war in the Bay of Pigs affair. The Challenger disaster was another effect where NASA officials disregarded engineer’s concerns and decided to launch the shuttle.

Abilene Paradox The Abilene paradox is a paradox in which the limits of a particular situation force a group of people to act in a way that is directly the opposite of their actual preferences. It is a phenomenon that occurs when groups continue with misguided activities which no group member desires because no member is willing to raise objections. It was observed by management expert Jerry B. Harvey in his 1988 book The Abilene Paradox and other Meditations on Management. The name of the phenomenon comes from an anecdote in the book which Harvey uses to elucidate the paradox:paradoxmanagementJerry B. Harvey1988The Abilene Paradox and other Meditations on Management

On a hot afternoon visiting in Coleman, Texas, the family is comfortably playing dominoes on a porch, until the father-in-law suggests that they take a trip to Abilene (53 miles away) for dinner. The wife says, "Sounds like a great idea." The husband, despite having reservations because the drive is long and hot, thinks that his preferences must be out-of-step with the group and says, "Sounds good to me. I just hope your mother wants to go." The mother-in-law then says, "Of course I want to go. I haven't been to Abilene in a long time."Coleman, TexasdominoesAbilene The drive is hot, dusty, and long. When they arrive at the cafeteria, the food is as bad. They arrive back home four hours later, exhausted. One of them dishonestly says, "It was a great trip, wasn't it." The mother-in-law says that, actually, she would rather have stayed home, but went along since the other three were so enthusiastic. The husband says, "I wasn't delighted to be doing what we were doing. I only went to satisfy the rest of you." The wife says, "I just went along to keep you happy. I would have had to be crazy to want to go out in the heat like that." The father-in-law then says that he only suggested it because he thought the others might be bored. The group sits back, perplexed that they together decided to take a trip which none of them wanted. They each would have preferred to sit comfortably, but did not admit to it when they still had time to enjoy the afternoon.

Avoiding Group Think The group should be made aware of the causes and consequences of group think. The leader should be neutral when assigning a decision- making task to a group, initially withholding all preferences and expectations. This practice will be especially effective if the leaders consistently encourages an atmosphere of open inquiry. The leader should give high priority to airing objections and doubts, and be accepting of criticism. Groups should always consider unpopular alternatives, assigning the role of devil's advocate to several strong members of the group. Sometimes it is useful to divide the group into two separate deliberative bodies as feasibilities are evaluated.

Spend a sizable amount of time surveying all warning signals from rival group and organizations. After reaching a preliminary consensus on a decision, all residual doubts should be expressed and the matter reconsidered. Outside experts should be included in vital decision making. Tentative decisions should be discussed with trusted colleagues not in the decision-making group. The organization should routinely follow the administrative practice of establishing several independent decision-making groups to work on the same critical issue or policy.

Questions Can a firm guarantee complete product safety? Based on the information presented which company do you think is more to blame for the deaths and injuries? “If an Explorer driver never checks the tire pressure and drives well above the speed limit, he has no one to blame but himself in an accident—not the vehicle and not the tires.”

Do you think the government should be blamed in the Explorer deaths and injuries? Have you had any experience with a Ford? Have you had any experience with Firestone tires?

What can be learned A firm today must zealously guard against product liability suits –Thorough product testing Suspicions and complaints about product safety must be thoroughly investigated Health and safety of customers is entirely compatible with the firm’s well-being –Lose/lose scenario if customer safety is ignored –If you don’t do it for ethical or moral reasons do it because it make good business sense

Salvage strategy –Attempt to tough it out, try to combat bad press, deny culpability, blame someone else, resort to the strongest legal defense. (this is what Ford did because it blamed Firestone for everything) –Shredded tires were obvious and hard to blame on somebody else Conciliatory strategy –Full admission of problem and removal of risk –Both strategies can be costly Salvage puts potential costs in the future, Conciliatory puts costs now Where blame is most likely shared, the solution of the problem lies not in confrontation but in cooperation

Ford and Firestone today