The federal government and the Firestone Tire & Rubber Co. have reached an agreement under which Firestone wil voluntarily recall an estimated 9 million Firestone 500 steel-belted radial tires.
An announcement is expected shortly, possibly today, pending resolution of some details, but the major issues have been resolved, according to sources close to the negotiations.
The National Highway Traffic Safety Administration has agreed to waive any penalties it might have levied against the tire maker, includiong a miximum fine of $800,000 that could have accompanied a government-ordered recall, sources said.
The recall could cost Firestone an estimated $100 million before tax benefits are realized, based on the amount of money the company claims it costs to produce each new 721-model steel-belted radial tire that will be used as a replacement for the 500.
That would be the largest recall of its type in history in terms of dollars.
Both Firestone and the NHTSA have refused to comment on the agreement, and a press conference scheduled for yesterday afternoon was postponed while last-minute details were being debated by the two groups.
It is still unclear, for example, if any form of proof of purchase will be needed in order for a customer to have 500s replaced free of charge.
The agreement, as outlined by sources close to the discussions, provides that Firestone will replace, free of charge, every 500 steel-belted radial manufactured between Sept. 1, 1975, and May 1, 1976, and still on the road.
The recall would include the Firestone PTC, a tire similar to the 500 built for automobile companies to use as original equipment on new cars. The total number of tires that would be affected is approximately 9 million, according to industry sources.
Estimates of how many tires would actually be returned under such a recall range from 3 million to 5 million at most, based on previous recall experiences.
Firestone has apparently also assured tha government that for its 500 tires produced for about six months before Sept. 1, 1975, the company will provide consumers with a 50 percent adjustment rebate on returns.
As part of negotiations, Firestone had claimed that production changes made in the Firestone 500 during its 1972-1978 lifespan significiantly improved the tire, making later versions of the 500 safer than earlier ones. NHTSA research confirmed company data, NHTSA sources have said.
The government and Firestone are still negotiation over what type of notification letter must be sent to owners of the tires in question, and what type of advertising including television and print media, the company must do to inform the public of the recall.
The framework for a voluntary agreement was drawn up late Tuesday after meetings between NHTSA Administrator Joan Claybrook and Fisestone Chairman Richard Riley. Attorney Clark Clifford, who has been negotiating for Firestone, was also present.
Last July, NHTSA issued a "preliminary determination" that the Firestone 500 steel-belted radial tire had a "safety-related defect" that has led to thousands of tire failures.
At that time, NHTSA called upon Firestone to voluntarily recall the tires, and initiated actions leading to a government-mandated recall if the tire company did not comply.
After Fireston balked at any recall, NHTSA held two days of hearings in August during which it heard testimony from victims of several accidents alleged to have been caused by failures of the 500 steel-belted radial.
At those hearings, Firstone gave the defense it has stuck to since, claiming that no one, including NHTSA, has been able to find any specific defect in the tire, and beyond that, the data used by NHTSA to show widespread consumer dissatisfaction with the 500 was largely unsubstantiated.
Still, NHTSA attorneys felt they had legal precedent to order a recall based solely on the abnormally high number of consumer complaints and adjustments (returns of tires for replacements due to some form of failure).
Firstone attorneys challenge that interpretation of the law. "You are not entitled to a presumption that an unresonable number of failures were caused by a design defect," said one Firestone attorney in an interview.
Besides, Firestone contended, the only reason consumer adjustment figures were so high for the Firestone 500 was the well-publicized Firestone policy of liberalk returns. "We're being punished," a Firestone officialsaid, "because we encourage our customers to come back if they are not satisfied."
On Sept. 1, a congressional watch-dog subcommittee issued a report sharply critical of Firestone for the 500 situation.
That report by the House Commerce subcommittee on oversight and investigations said the company data revealed that one out of every six Firestone 500s made had been returned by customers, a number more than twice as high as the company had reported.
In addition, the subcommittee reported, one out of every 11 Firestone 500s had suffered "tread separations, a type of tire failure that frequently leads to blowouts."
The findings of the report led subcommittee Chairman John Moss (D-Calif.) to call Firestone "an entrenched and recalcitrant manufacturner," and add that the company's refusal to take remedial action on its own in the face of growing evidence of problems with the 500 tire was "reprehensible in the extreme."