At Ford, defending quality is Job 1

Ford Motor Co. raced into 2000 in high gear, powered by its popular sport-utility vehicles and other top-selling models, a string of newly acquired luxury-car makers such as Volvo and a brash chief executive who's shaking up the company that invented the assembly line.

There was even talk that Ford might soon eclipse General Motors Corp. as the world's biggest automaker, a title Ford hasn't held since it was still being run by founder Henry Ford at the dawn of the Great Depression.

But now the Firestone tire crisis and a bout of other quality snags at Ford -- whose familiar slogan is that "Quality is Job 1" -- is struggling just to reassure the world that it's still building reliable, safe vehicles and is being candid with consumers and the government.

Ford probably has the cash reserves to weather the recalls, warranty repairs and court fights stemming from these cases, analysts said. But the rapid sequence of problems is raising questions about whether or not the automaker and its chief executive, Jac Nasser, could see their recent achievements clouded if a growing number of consumers start to doubt Ford's quality.

Whether or not Ford can preclude that event, and thus keep consumers confident about buying its cars and trucks, will determine whether the Dearborn, Mich.-based giant can maintain the momentum that has made it the envy of the automotive world.

"It's their worst nightmare," said David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation. "When you advertise your quality and then the market senses that you're not delivering, (buyers) question the whole message."

One issue dogging Ford is the perception -- at least among safety advocates and many consumers -- that it has remedied defects far too slowly and only after widespread public criticism. In the case of problem V-6 engines prone to head gasket failures, for example, the company extended warranty coverage to certain models in three incremental steps that left consumer advocates charging the company still failed to make good for hundreds of thousands of owners.

"The entire issue will circle around how they handle each of these problems," said George Peterson, president of AutoPacific Inc., an industry consulting firm in Tustin, Calif.

"You can generally maintain your corporate reputation if you handle these things very aggressively and forcefully, and say (to the public), 'Yes, there's a problem and we're going to fix it,' " Peterson said. "But if you try to justify it some other way, it becomes difficult."

Ford's overriding problem, of course, is the crisis surrounding the Firestone tires that equipped many of its Explorers, which have been the country's best-selling SUVs since the vehicle debuted a decade ago.

Bridgestone/Firestone Inc. launched a recall of 6.5 million tires in the United States on Aug. 9 amid a federal investigation into whether dozens of fatalities might be linked to faulty Firestone tires used mostly on Ford light trucks.

Yet Ford is grappling with other quality setbacks too.

On Tuesday, a California Superior Court judge -- ruling in the largest class-action lawsuit ever filed against a U.S. automaker -- said he might order a recall of as many as 2 million Ford vehicles over concerns that they are prone to stalling because of a faulty ignition/electrical setup. The recall would cover dozens of Ford models built between 1983 and 1995.

Ford also has been hobbled all year by problems with a 3.8-liter V-6 engine found on a variety of its cars and minivans, ranging from the Mustang to the Windstar, because the engine is prone to head-gasket failure. In May, Ford for the third time extended warranty coverage to the vehicle' owners, and now more than 1 million vehicles are involved. There is also at least one class-action lawsuit being mounted on behalf of the vehicles' owners.

Ford executives denied that the defect problems indicate any breakdown in the automaker's commitment to quality and safety.

"We are a victim of circumstances here," said Ken Zino, a Ford spokesman. "Certainly with the tire recall, we moved as quickly as we could once we understood what was going on."

To be sure, faulty parts and model recalls are hardly new in the auto industry. And some analysts aren't convinced that a significant number of consumers are going to start second-guessing whether or not to buy a Ford because of the company's recent setbacks.

"I don't think it will have a negative impact" on Ford's overall sales, said Michael Bruynesteyn, an analyst at Prudential Securities. "There are recalls every year, and there are court cases that Ford and GM and DaimlerChrysler then win on appeal every year.

"Clearly the Firestone situation is worse than anything we've seen," he said, "but the Explorer is not going to be damaged over the long term. Ford is actively managing this situation, and they're doing the best they can."

David Healy, an analyst at Burnham Securities, said that "the tire recall with its nasty, daily headlines has some potential for slowing things down temporarily" for Ford, "but I think frankly it will blow over."

Still, Ford's effort will come under further scrutiny when Congress holds hearings on the Firestone situation next month. A House Commerce Committee hearing is set for Sept. 6, and a Senate Commerce Committee hearing, originally set for the same day, is now scheduled for Sept. 12.

Nasser so far has declined to appear at the House hearing, which drew complaints from some lawmakers. But Ford said Wednesday that both committees agreed to accept two other Ford executives at their hearings.

Regardless, some auto-safety groups noted that Nasser is appearing in television commercials to defend his company.

"Ford's reputation is on the line here," said Clarence Ditlow, executive director at the Center for Auto Safety in Washington, a group that has been critical of Ford's response to the tire recall and gasket problems.

But Ford and Bridgestone/Firestone, a unit of Bridgestone Corp. of Japan, have argued that they didn't have reason to suspect a serious defect affecting U.S. tires until May of this year.

Ford, like GM, is a behemoth by almost any measure. Ford's sales last year totaled $163 billion, and it sold 7.2 million vehicles around the globe. The company has more than 350,000 employees and 150 manufacturing plants worldwide.

The stock has taken a beating in the aftermath of the Firestone mess, and it has lost 11 percent of its value so far this year. Ford, however, gained 63 cents Wednesday, to $25.88 a share, on the New York Stock Exchange.