Bridgestone shares dive as recall looms

Shares in Bridgestone, the Japanese tyre maker, plunged 10 percent in Tokyo yesterday morning on reports the company would recall up to 20m million tyres because of safety fears sparked in the US.

Bridgestone Firestone, the Japanese company’s US subsidiary, was expected to make an announcement yesterday in Washington DC. Representatives of Ford Motor Company were also expected to be present.

The recall is likely to affect some of Bridgestone Firestone’s controversial ATX, ATX11 and Wilderness tyres, which have been under investigation by the US National Highway Traffic Safety Administration after being linked to several fatal accidents.

Concern over the tyres, and pressure for a recall, has been mounting for the past 10 days. Last week, the National Highway Traffic Safety Administration confirmed that it was investigating reports of 21 traffic deaths which allegedly resulted from tyre treads separating from their casings. That number has now been revised to over 40.

Bridgestone in Tokyo declined to confirm or deny reports of a recall but analysts said the move would be costly and the whole incident damaging to the company’s image. “If the reports of a recall prove to be true, the impact will be serious for Bridgestone,” said Tsuyoshi Mochimaru, analyst at Dresdner Kleinwort Benson in Tokyo. “In the short-term Bridgestone would have to report an extraordinary loss, and in the medium-term Firestone’s brand image will be downgraded as tyres are Firestone’s biggest product.”

Bridgestone’s shares regained some ground by midday in Tokyo, trading at Y2,070, down Y190 or 8.4 percent from Tuesday.

Firestone’s tyres are sold mainly in North and South America and its unclear whether Bridgestone would extend the recall beyond the US. At the time of the NHTSA confirmation, a couple of public safety groups were already demanding a recall of certain vehicles equipped with the ATX and Wilderness tyres. Reuters