3. Should a company apply the ethical, behavioral, and legal standards of the home country or host country in its overseas operations? On 31 March 2001 Bridgestone Corporation’s president and three executive vice-presidents resigned.

Though the company president denied that he was resigning because of the events at its wholly owned US subsidiary, Bridgestone
Firestone North American Tire LLC, the problems surrounding the recall of 6.5 million tires there had been a disaster. In the first seven months after the recall, the costs to the company’s reputation and its direct financial loss had escalated beyond all expectations. The parent company’s stock dropped over 50% on the Tokyo Stock Exchange. The $750 million dollars Bridgestone
Firestone had initially set aside to cover the direct costs of the recall and impending lawsuits proved totally inadequate, and Bridgestone had to inject more capital into the Firestone subsidiary.

Sales of Firestone tires declined (though the parent company’s Bridgestone brand tires continued strong).

The recall eventually led to closures of some of the Firestone manufacturing plants in the United States.

Relations with Ford Motor Company, a major Firestone customer, were strained and eventually the relationship was severed (though Ford honored existing contracts to buy tires from Firestone) (Nikkei Net, 2004). Approximately 60% of the recalled tires were on Ford Explorer sports utility vehicles (SUVs), and the recall and subsequent lawsuits and out-of-court settlements eventually cost Ford $3.5 billion.

Bridgestone’s apparent slowness in identifying problems with their tires, their delay in taking action, and their lack of responsiveness to questions by the public and the media had led to sharp criticism. The US government, and governments in other countries where the tires had been sold, had launched investigations.