Transcript - Ford/Firestone Lawsuit - Bloomberg News - May 23, 2001
Ford/Firestone Class Action
May 23, 2001
Reporter: More tire trouble over at Ford. We know that the auto giant again announcing the big recall of all those tires and the big charge that goes along with it. Melissa Lee out to Dearborn tracking that. Also this morning, the individual responsible for filing really the first major class-action lawsuit against Ford back in October of 2000. His name is Ken Moll and he is a partner and manages Ken Moll & Associates out in Chicago. He joins us from Chicago this morning. Ken I want to say good morning to you.
Ken Moll: Good morning
Reporter: Tell me as a lawyer how you assess the liability management of the most recent action by Ford.
Ken Moll: Well initially Ford and Firestone last year recalled approximately 6.5 million tires, including the Wilderness AT 15 inch tires. We felt they didn't go far enough. That it should have been a broader recall. So lawyers throughout the United States, we filed a worldwide class-action lawsuit against Ford and Firestone alleging, amongst other things, that they should broaden the recall
Reporter: Let's talk about the present though. I've got Bridgestone coming out yesterday saying, listen, we're not gonna sell you any more of our tires 'cause we don't want you blaming us and then a few hours later I have Ford come out and say, you know what, not only do we not want to buy any of your tires, but any of your tires that we have we don't want them. We are gonna pull them all back in and send them back to you. And again all this, one presumes, is done as an effort to manage the liability going forward for the lawsuits that are being presented here. My question to you is if I am evaluating the liability that Ford has based on their recent action, to what extent does what they are doing here with this recall either reduce their liability, add to it, or is it irrelevant to it?
Ken Moll: Well actually the public perception is that Firestone acted initially when in reality Ford made the decision to recall an additional 13 million tires. Firestone got wind of it and wanted in a PR effort said 'we're cutting ties with you'. But in actuality Ford is the one that initiated the response to recall 13 million tires, which Firestone did not want to cooperate with Ford in doing so. How does it assess their liability in the future? They did exactly what we asked for in our lawsuit. They recalled 13 million additional tires. There still are additional tires that we want them to recall and that is Wilderness ATX and ATX 2. But basically they've done what we asked for in our class-action lawsuit.
Reporter: Where does it leave their liability, your assessment of their liability over at Firestone Bridgestone.
Ken Moll: Their liability, Ford has taken responsibility for the cost of the replacement of these tires. So, whether or not they want to go after Firestone for a contribution, that's up to them. But basically they volunteered to recall the exact tires that we wanted them to recall. What's important is that the summer months are coming and we find a higher failure rate in the warmer months, warmer climates. So we believe that their acting, we commend their action. We think it was a little bit too late, but we commend them for doing their job.
Reporter: Are you going to continue to pursue Ford in your lawsuit and do you believe that you are going to be able to, that you are going to seek damages that will be well in excess, or at least in excess of an already $2 billion charge the company is facing on the recall alone?
Ken Moll: There's the issue of personal injury cases. There's over 174 deaths in America. We represent clients from Venezuela, Saudi Arabia, Chile, Mexico, Canada, England.
Reporter: What kind of damages are you seeking at this point though?
Ken Moll: We're seeking personal injury damages.
Reporter: What sort of financial damages are you targeting?
Ken Moll: Well individually......
Reporter: In the aggregate?
Ken Moll: In the aggregate, that's unclear at this time. There are hundreds of deaths.
Reporter: Is a dollar? Is it a billion dollars? Is it 100 dollars?
Ken Moll: That we can't give you. There is, on the recall alone, 2-3 billion estimated for the 13 million tires recalled. If there are additional tires recalled, that will increase their costs.
Reporter: OK. Ken, I want to jump over to Alan Baum real quick. He's an auto analyst over at Planning Edge. You've heard, I hope Alan, some of what Ken had to say here. I want to know where you believe this goes from here? What happens next and really what's the most important thing from an investor standpoint right now?
Alan Baum: Well clearly Ford is trying to manage this issue and be proactive and right now the spin is positive from their perspective in the sense that they're, quote, are looking out for the consumer. The flip side of this, of course, is that six months ago they said that the tires that are now being recalled were safe, based on their own investigation, and now they are turning on that. So that is a recanting of their position, and obviously from a financial standpoint as we have already heard this morning and in the last day or so, this is a huge financial hit in the short term. So, there's difficulty in that sense and also, perhaps even more importantly looking forward, the sport utility market is becoming more and more competitive. The new Explorer, which or course doesn't have these tire problems, is facing some competition and difficulty in the market.
Reporter: If you look at your assessment as an auto analyst talking to an investor, Alan, in under 30 seconds tell me what you do with Ford and the rest of the sector right now?
Alan Baum: Well I think in the long term Ford is actually the strongest of the American based, well I don't know if we can still put Daimler Chrysler in that category, Big 3. Chrysler with their obvious problems. GM with their longer term product problems. Ford, however, is not a great investment play. There are probably automotive suppliers that are a better play.
Reporter: Fair enough. Alan, I'm gonna leave it there. I'm gonna thank you for your time. Thank you sir.
Alan Baum: My pleasure.
Reporter: Alright, Ken I want to thank you too. Appreciate it.
Ken Moll: Thank you