Labor Dispute Caused Poor Quality Products

Summary of working paper 9524
Featured in print Digest made in Decatur during the labor dispute were some 15 times more likely to have resulted in a financial claim against the company than were tires manufactured in other plants.

In August 2000, Bridgestone/Firestone and Ford jointly announced the recall of 14.4 million tires, some 6.5 million of them still on the road, mostly on Ford Explorers. It was big business news, especially after the National Highway Traffic and Safety Administration (NHTSA) the following month issued an advisory concerning several other sizes and models of Firestone tires and asserted that Firestone tires under investigation were related to 271 fatalities and more than 800 injuries. The most common source of failure of the recalled tires was tread separation: that is, a sudden detachment of the tire's rubber tread from the steel belts, causing the tire to blow out.

At the time, a number of observers - members of Congress, plaintiffs' attorneys, and reporters - hypothesized that the tire problem was related to a long, contentious strike at a plant in Decatur, Illinois, that made many of the tires involved. They speculated that under-trained replacement workers or lax supervision during the strike contributed to an excess number of tire defects. Or that workers may have been fatigued and more prone to errors because Firestone had introduced a 12-hour, rotating shift to operate the plant 24 hours a day during the strike.

In Strikes, Scabs and Tread Separation: Labor Strife and the Production of Defective Bridgestone/Firestone Tires (NBER Working Paper No. 9524), co-authors Alan Krueger and Alexandre Mas do find that labor strife in the Decatur plant coincided closely with lower product quality, but the story is not simply that replacement workers made bad tires. Instead, defects peaked when strikers returned to the plant, and just before they went out on strike. Thus the paper provides new evidence on the impact of labor strife on the quality of production at the plant level, and suggests that workers provide more effort and due diligence if they feel that they are being treated better.

The relationship between worker treatment and the quality of production has proved difficult to establish. But because of the recall of the Firestone tires, Congressional hearings, and scores of liability lawsuits, confidential, proprietary data now have been made publicly available.

In large part, tires are still made by hand. So, there is scope for human error in producing this product. In addition, because millions of tires are made and in service each year, failure rates can be calculated for an enormous sample. The available data also enable the authors to rule out several other explanations that might account for the excessive number of defects found in tires produced in the Decatur plant during the period of the labor dispute, from 1994 to 1996.

For instance, Bridgestone/Firestone executives blamed the tire defects in part on the design of the Ford Explorer, which they argued was prone to roll over. They also argued that Ford recommended that the air pressure of the tires be set at 26 pounds per square inch, while the tire manufacturer recommended 30 PSI. At lower pressures, tires become hotter and are more prone to blow out. The NHTSA data, however, indicate that there were more complaints involving tires manufactured in Decatur during the labor dispute than at other times, or about the same tire models made at other Bridgestone/Firestone plants. The researchers analysis of the company's own engineering tire tests, conducted at controlled speeds, load, tire pressure, and ambient temperature indicated the same pattern.

Krueger and Mas estimate that more than 40 lives were lost as a result of the excessive number of problem tires produced in Decatur during the labor dispute, and that the number probably would have been more than twice as high if not for the tire recall. "There may be costs associated with hiring replacement workers and labor strife that are not internalized or anticipated by labor or management, especially in industries that affect the public safety," they write. "Public policy could possibly play a valuable role by requiring more safety inspections for products manufactured during a strike or period of labor strife."

Ironically, the authors note, an internal Bridgestone document obtained by the United Rubber Workers union reportedly stated, "...while it was nice to share a good relationship [with the union], it would no longer be in the company's interest." But in the four months after the recall announcement, the stock market value of Bridgestone/Firestone stock plunged from $16.7 billion to $7.5 billion. The company's top management was replaced. And the Decatur plant was closed in December 2001. "This episode would serve as a useful reminder that a good relationship between labor and management can be in both the company's and the union's interests," Krueger and Mas conclude.

The Japanese tire manufacturer Bridgestone purchased Firestone in 1988, making the combination the largest tire maker in the world. Initially, labor relations went smoothly. But in 1994, the company demanded that the union move from 8-hour to 12-hour shifts that rotated between day and night and that it operate the plant seven days a week, among other concessions. The negotiations ended in a strike. The company hired replacement workers at a pay rate 30 percent less than the union rate.

The Decatur plant, by May 1995, employed 1048 replacement workers and 371 permanent workers who crossed the picket line. The union unconditionally agreed to return to work that month, and by 1996 a majority of the workforce in the Decatur plant was made up of strikers who had returned to work. A month-by-month analysis reveals that the excess number of defect claims for tires from the Decatur plant reached a peak for tires made in the beginning of 1996.

Four years after they were produced, P235 tires made in Decatur during the labor dispute were some 15 times more likely to have resulted in a financial claim against the company than were tires manufactured in other plants. Before the recall, these tires had a fatal accident rate of 10 to 30 per million tires produced. A settlement was ratified in December 1996, and the number of defects began to abate at the Decatur plant.

-- David R. Francis