AKRON—Bridgestone/Firestone Inc.'s recall of 6.5 million light truck tires likely will cost the company $350 million to $500 million in the short term, analysts say, but the potential fallout from lost business as customers switch to competitors' brands could have far greater impact on the company's bottom line.
In addition, there could be tens or even hundreds of millions of dollars in legal costs to defend or settle a growing number of lawsuits, analysts indicated.
BFS parent Bridgestone Corp. said it would take a $350 million extraordinary charge against earnings to cover the expected costs of the recall, according to Reuters News Service. In Tokyo, the price of Bridgestone shares fell 11 percent on Aug. 9 to their lowest point in nearly four years.
"The big question is what this will do to their (BFS') image and market presence," said Stephen J. Girsky, an automotive industry analyst with Morgan Stanley Dean Witter. "These light truck type tires are high-margin products for most tire companies, and Firestone (brand) has about an eight-and-a-half percent share of the replacement market."
"The company is making every effort to isolate the problem to this one size and these specific Firestone models," Mr. Girsky said, "in the hope of minimizing the negative impact on their other products."
The range in the estimated cost reflects uncertainty about how many consumers will insist on changing to another brand, analysts said. The cost of the recall could mount as well, depending on how much the company spends on advertising and marketing efforts to shore up its image and fend off competitors looking to steal away customers.
BFS reported $543 million in pre-tax operating profits last year—representing 26.1 percent of parent Bridgestone's profits—on sales of $7.6 billion. First-half results are due out soon.