Strains in the Strategic Alliances
Throughout much of August 2008, the safety of Bridgestone/Firestone tires mounted on Ford
Explorer SUVs was a topic of compelling interest and rapid developments. Examining this story
gives us a chance to see how relationships between companies can be built up over time to
reflect one set of circumstances, but then deteriorate rapidly when there is a change in the
environment or the situation.
While investigating traffic crashes and fatalities in Ford SUVs, it was determined that
Bridgestone/Firestone of Japan supplied millions of tires to the Ford Motor Company for use on
SUVs. Initial evidence suggests that when these tires were not properly inflated, the tread was
more likely to separate from the tire at high speed, leading to a loss of control. More than 50
deaths were attributed to the combination of Explorers and Bridgestone / Firestone Wilderness
AT tires.Tires are a complement to autos but tire manufacturing is so different from auto making
that different companies have emerged in each industry. Tire companies market to the
automakers as "OEMs" (original equipment manufacturers), and also sell to the "aftermarket,"
i.e., replacement tires sold in service centers. Automakers, as part of their supply chain
management, select a tire supplier from among the global tire manufacturers for each car that
they manufacture, and each location where they manufacture.In a global auto market, design,
brand names and manufactured are managed in multiple markets. The major automakers
(General Motors, Ford, Toyota, DaimlerChrysler, and others) compete in North America, Asia,
Europe, Africa, Japan, the mid-East, Latin America, and everywhere else in the world. The tire
companies (Michelin, Bridgestone/Firestone, Pirelli, Goodyear, and others) will naturally choose
where to compete based in part on the relationships they have with automakers in those
regions.These conditions are good for developing long-term supply relationships where tire
manufacturers commit some capacity to equipping a particular automaker's car. Ford Explorers
were top sellers, so demand for the flawed tires grew quickly. As a result, a healthy and
profitable relationship was built up between the two companies. But it didn't last; the dates and
headlines of the two WSJ articles indicate the nature of the problem: As the crisis was
unfolding, the two companies tried to stick together. But within thirteen days, the problem grew
in scope and severity as investigators in Congress and other countries began to look at the
activities of the companies. Instead of sticking together, the two companies scrambled to
maintain their own legal and marketing positions that would benefit them the best.
QUESTIONS:
1. Companies do business with each other every day as supplier and as customer. What is the
significance of calling such a relationship a "strategic alliance?" What is the evidence for
applying that term to Ford and Bridgestone / Firestone?
2.Early explanations for the crashes focused on the differences between recommended tire
pressures as stated by the tire manufacturer and the automaker. If there were missed
communications between the parties, what does that suggest about making strategic alliances
work better? What specific steps can allies take? 3. How does this affect alliances between Ford and other tire manufacturers, as well as
relationships between any other automakers and tire manufacturers?

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