Firestone Tire and Rubber Co. has been fined $500,000 -- the largest amount ever assessed under a 1966 safety act -- for putting tires on the road that the company knew would fail federal safety tests.

Although the company disputed the charge that it marketed the tires even though it knew of the defect, a Firestone spokesman said yesterday that the company agreed to pay the fine "to avoid potentially expensive litigation and further unproductive use of company resources."

Firestone was the center of the largest product recall in government history in 1978 -- 14 million Firestone 500 steel-belted radial tires recalled for a defect that the National Highway Traffic and Safety Administration found caused large numbers of failures, including some which resulted in deaths and injuries.

The tires covered by yesterday's fine are Firestone 500 tires and a related tire line marketed under the Primero brand, both manufactured before the tires involved in the massive recall. The case in which the fine was assessed involved 400,000 trees produced in 1973 and 1974 and recalled by Firestone in early 1977.

"When it was determined that these tires produced in 1973 and 1974 might be in noncompliance with one section for the federal standard relating to indoor testing, we initiated a voluntary recall," said Firestone spokesman Michael Fay.

But NHTSA Administrator Joan Claybrook said her agency had come across evidence during the investigation of the larger recall that the company knew of the defect at least a year or two before it began the recall and had continued to market the tire.

"It's very discouraging in terms of thinking about the responsibility to thinking about the responsibility to the public and corporate behavior," she said.

In fact, the 400,000 tires were recalled in 1977 in an effort Firestone had begun in 1974 to avoid a larger recall. At the time the company contended problems with the 500s could be traced to a "bad batch" from one factory.

In the action resulting in yesterday's fine, the NHTSA found that 400,000 Firestone 500 tires, sizes HR78-14 and HR78-15 and 5,000 Primero tires, size GR78-15, were manufactured improperly and didn't comply with a Federal Motor Vehicle Safety Standard involving high-speed performance for new tires.

"Our investigation showed that Firestone learned that these tires were likely to fail the standard before our testing revealed it, but the company did not notify us and recall the tires," said Claybrook.

Claybrook had said in 1978, when evidence first surfaced related to the fine, that she would seek to impose the maximum $800,000 fine on Firestone.

The figure was reduced in the course of negotiations leading to the settlement.

The largest previous civil fine by NHTSA was $400,000 assessed against General Motors Corp. in 1978 for refusing a government order to notify owners of certain GM vehicles of a safety-related defect.

Claybrook said yesterday it is hard to gauge the deterrent effect of such fines. "Probably the largest deterrent is the requirement for the recall, because that's by far the most substantial cost," she said.

The key to what the government was willing to accept as a negotiated penalty was that "it had to be a very substantial penalty -- because they had knowledge of this and had not disclosed it to the public," she said.