Explorer sales dropped 37% in 2000. In December 2000, Saudi Arabia banned new and used vehicles with Firestone tires. Fire-stone announced that it believed the ban was unjustified. Both the US, Congress and Senate held hearings, and a new act were passed on October 11. 2000, called the Transportation Recall Enhancement, Accountability, and Documentation Ad. The act dots the following.

• Strengthens the reporting requirements for manufacturers of motor vehicles and motor vehicle equipment (including the reporting of defects first discovered in a foreign country)

• Increases the civil penalties for viola. lions of safety regulations (e.g., fines for certain violations of Title 49 were raised from $1,000 to $5,000 for each violation, and the maximum penalty for a related series of violations was raised from $800,000 to $15.000,000)

• Provides additional criminal penalties (e.g., for any knowing and willful false statement that was intended to mislead NIITSA with respect to a defect that causes death or grievous bodily harm, the possible prison term was raised from five years to 15)

• Requires NIITSA to revise and update its safety standards for tires

• Increases the number of years that a defect must be remedied without charge to the owner (from three years to thy for tires)

• Increases the authorization for funding the NIITSA

• Requires the secretary of transportation to report to Congress within a year on the criteria, procedures, and methods that the NIITSA uses in determining whether to open an investigation of a possible defect

• Contains other safety-related provisions"

Questions

1. Why didn't Ford and Firestone learn from their past recall debacles?

2. Why did Ford. Firestone and the NHTSA not discover the nature and seriousness of the tread-separation, product-liability problem earlier?

3. Why did Ford or Firestone not report the problem to U.S. authorities earlier?

4. Ultimately, which was the largest cost to Ford and Firestone: fines, lawsuit settlements, or the loss of reputation leading to loss of future revenue and profits?

5. What errors should be corrected in the cost-benefit analysis presented?

6. What were the ethical risks, if any, involved in this tire recall situation?

7. If you were advising Ford and Bridge-stone, what should each include in their risk management program?