Bridgestone Shares Fall on Dollars 50bn Claim - Financial Times (London) - December 6, 2000
Bridgestone Shares Fall on Dollars 50bn Claim
By: David Ibison
Financial Times (London)
December 6, 2000
Bridgestone, the world's second-largest maker of tyres, moved swiftly yesterday to quash a claim that punitive damages arising from the recall of tyres linked to fatal car accidents could be as high as Dollars 50bn - forcing Firestone, its US unit, into bankruptcy.
Kenneth Moll, a lawyer leading a class action against the company on behalf the alleged victims, said damages of Dollars 50bn would be 'appropriate' if it were proved that Firestone 'purposely withheld relevant information about safety'.
Bridgestone shares plunged Y200, or 13.7 per cent, in response, prompting Yoichiro Kaizaki, chairman, to call a press conference at which he described Mr Moll's claim as 'groundless'. He said Bridgestone had set aside Dollars 450m to cover losses arising from the recall, but that estimated losses stemming from legal claims against the company could now hit Dollars 900m, higher than previous estimates.
However, Mr Kaizaki said that despite the escalating costs, Bridgestone/Firestone had reserves of Dollars 2.3bn and faced no imminent threat of closure.
'Bridgestone/Firestone is not at a stage where it is considering filing for bankruptcy,' he said.
Bridgestone faces a number of claims from the US and Venezuela alleging Firestone products were responsible for accidents that caused 165 deaths. The claims are being contested.
After the claims, Bridgestone initiated a massive recall programme involving the replacement of 6.5m tyres in the US, of which 80 per cent has been completed.
The recall has claimed the head of Masatoshi Ono, who was replaced as president of Bridgestone/Firestone by John Lampe. Mr Lampe has closed manufacturing facilities, cut production at other plants and laid off staff.
Sales of Bridgestone/Firestone tyres to the commercial market fell 40 per cent in September-October while US sales fell by up to 18 per cent, the company said.
Morgan Stanley Dean Witter, the investment bank, has estimated operating profit from the US this year will drop 49 per cent to Dollars 277m, and will fall further to Dollars 179m in 2001. Bridgestone is set to revise earnings estimates for the year this month. MSDW estimates net profit will drop from Y88.7bn to Y62bn before rising to Y77bn in 2001.
The recall has sparked a dispute between Bridgestone and Ford, maker of the Explorer sports utility vehicle in which most of the accidents occurred.
Ford claims Bridgestone's tyres are solely responsible but Bridgestone argues that the accidents may have been caused by a combination of factors, including the design of the Explorer, air temperature and tyre pressures.