Firestone tire recall punctures Bridgestone's profit

TOKYO - Bridgestone Corp. swung into the red in the first six months of 2001 because of the costs of the huge Firestone tire recall in North America, but the company reiterated its forecast for a full-year profit.

The tire giant posted a consolidated net loss of 0.6 billion, or $255 million at current exchange rates, compared with a year-earlier profit of $157.5 million. Special charges of $361 million for the recall and $212 million to close the Decatur, Ill., tire plant punctured earnings.

In the last 18 months, Bridgestone has swallowed extraordinary losses of $1.04 billion from the recall.

Operating profit dropped 44.5 percent to $436.5 million, despite a 3.7 percent rise in revenue to $8.56 billion.

All of the company's results were converted to dollars at the rate of 120=$1.

For all of 2001, Bridgestone forecasts that net profit will drop 44 percent to $85 million, while sales will rise 6 percent to $17.97 billion. It also plans to maintain its total dividend payment steady at 8 a share.

Bridgestone forecast that its North American tire sales will decline, although sales of replacement tires will 'begin to recover, led by measures for revitalizing the Firestone brand and by sales gains in Bridgestone-brand tires.' Sales to carmakers will slide, reflecting lower production volumes, it said.

In Japan, domestic demand will be flat, but a drop in car exports to North America will hurt sales to carmakers. European sales will grow.

Responding to a question as to whether Bridgestone might drop the Firestone brand in North America, President Shigeo Watanabe said: 'That's not going to happen. Firestone won't go away.'

Sales of Bridgestone-brand tires will increase, especially to carmakers, he said, but the Firestone brand's strength with consumers based on its 100-year history and large dealer network cannot be ignored.

Firestone-branded tires make up about 70 percent of Bridgestone's sales in the United States, and Bridgestone-branded tires about 30 percent, Watanabe said. In the future, he said, a 50-50 split 'is what we're looking for.'

Separately, the company said its U.S. arm, Bridgestone/Firestone Inc., has bought a 52 percent stake in privately held Morgan Tire & Auto Inc. of Clearwater, Fla., and plans to buy all of the tire retailer eventually. Terms were not disclosed.

Morgan, the second-largest U.S. independent tire retailer, operates 558 stores in 25 states. All of its outlets will be renamed 'Tires Plus.'

You can reach James B. Treece at jtreece@crain.com

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