Bridgestone Recall Campaign

Risk: The discovery of vehicle component defects that lead to expensive recall campaigns

Risk Description:

Recall campaigns are not infrequent occurrences; they happen all the time. Recall campaigns can range from products like batteries to very expensive automobiles. In fact, many do not understand how frequently vehicles are recalled; as of April of this year, U.S. automobile manufacturers recalled close to 15 million vehicles. (Naughton) Nonetheless, automotive recall campaigns tend to be the most costly, as automobile manufacturer outlays include replacement component costs, labor costs, and public relation costs. On a separate note, legal liability costs for those harmfully affected by vehicle defects are also quite costly, but it is

In 2001, Ford recalled 13 million Firestone tires that were stock components on some of its larger vehicles for tire failures. The overall cost of the recall campaign was close to $3 billion, and included a delayed launch of a new vehicle and 50-percent drop in earnings per share. Even further, Ford was forced to temporarily shutdown two of its plants for two weeks and idle one of its plants to make more tires available. During that time, Ford’s CEO claimed he was “forced” to recall the tire, as its tire supplier—Bridgestone—refused to recall the component itself. However, Bridgestone refuted the allegation and blamed the poor design of Ford vehicles as the problem. (Jones) Ultimately, Ford cut off their partnership with Bridgestone. This instance only proves that both parties can be to blame, but the automobile manufacturer pays the upfront

The cause of the recall is attributed to faulty airbag electronics. Ultimately, Ford stated that this particular campaign would cost the company roughly $500 million, lowering profit expectations for the year. (Backman) Ultimately, vehicle recalls, whether the fault of Ford or its suppliers, are major risks. Aside from being exorbitantly expensive, recalls campaigns are difficult to predict and measure future occurrences.

Risk Mapping: High Frequency, Medium Severity

In 2012, Ford conducted 24 recall campaigns encompassing close to 1.5 million of its vehicles. This may equate to about two recall announcements a month. Was this just a bad year? No, it is a trend. In 2013, Ford led 15 recall campaigns covering more than 1.2 million vehicles. (Naughton) By the end of 2014, Ford is predicted to have recalled just as many of its vehicles as previous years. Recall campaigns are frequent, especially for Ford, and its associated costs can range from several million to several billion. Thus, the risk of defective vehicle components, or parts, is high frequency-medium severity.

Management