NASHVILLE, Tenn. (Dec. 14, 2000)—Suppliers said Bridgestone/Firestone Inc. tried to squeeze them for price concessions of 3 to 10 percent in August to help offset the expense of the Firestone tire recall.
The tire maker asked for cuts to take effect from September through early 2001, several suppliers charged. Some said a letter announcing the request included a "veiled threat" that Bridgestone/Firestone would remember those companies that didn´t comply.
Most suppliers weren´t comfortable discussing meetings with Bridgestone/ Firestone where they individually hashed out the proposed cuts. Several were willing to talk about the requests as long as their names weren´t used.
"It´s an ugly situation," a chemical company official said. "We were displeased. Why do we have to pay their legal fees?´´
A raw materials supplier said "just about everybody left disgusted," adding that Bridgestone/Firestone "has sucked the profit out of all of its suppliers over the years."
A spokeswoman for the tire maker said she didn´t know of anything like that happening, but said the firm is always looking to cut costs.
John T. Lampe, Bridgestone/Firestone chairman, president and CEO, said he did not know about the requested price cuts or the meetings.
"I don´t know anything about that," he said. "I hope our purchasing department continues to convince our suppliers that we need better costs and better pricing. That´s their job. But I don´t know anything that we´ve done specifically as a result of the recall."
The materials supplier maintained Bridgestone/Firestone sent out letters asking all major suppliers to cut costs and asked that each meet with the company. The tire maker asked each for a reduction of 5 to 10 percent, he said.
However, the chemical business official said the request his firm received was less than 5 percent, which his company turned down at a meeting with a Bridgestone/Firestone representative "who didn´t seem to have his heart in it and even had a hard time selling it."
Other suppliers gave the tire maker concessions, he said.
The cost-reduction sessions took place during a two-week span in August, another executive said. He wouldn´t elaborate on what transpired.
Many suppliers are nervous about talking about a customer. One executive at a chemical company, for example, was surprised that word had gotten out about face-to-face sessions. After huddling with others in his corporation, he had no comment, other than to say current pricing levels are not healthy and need to be improved.
Several other suppliers agreed.
"The entire (tire) industry has attempted to squeeze out the profits from suppliers and a lot lose money," the materials supplier said. "It´s always been a thin profit business. But this year it´s been particularly tough as the margin gets lower and lower."
Most of those who met with the tire maker complained about the reduction edict, he said.
When his firm received one of the Bridgestone/Firestone price concession request letters, which he indicated were individualized, it replied that it was unable to make the cuts. He declined to produce the letter, since the exact percentage of price reduction sought would give him away.
After his company refused to pare down costs further, he said, Bridgestone/Firestone set up a face-to-face meeting.
"The letter had a veiled threat," the executive maintained. "It said that during this time they would be watching who cooperated with them and keep that in mind later."
The meetings were held individually, the official noted, and "they didn´t make eye contact.
"They asked for our help and tried to wring any kind of concession from the suppliers they could," he said.
All tire makers use the veiled threat, he said, maintaining "they´re constantly trying to squeeze the last drop of blood out of you. There´s no loyalty anymore. So we said `no, no, no´ (to Bridgestone/ Firestone) and they gave up.
"I don´t know whose idea this was because most of these people know the shape of the industry. They create a problem for themselves (resulting in the recall) and then try to squeeze us. But when they´ve already bled us to death, it can´t be done."
The price concession requests may be global, the chemical company official said.
Most firms won´t discuss the issue even with each other, fearing retaliation by the tire maker, he added.
"I have information that they asked for price cuts from a company in Brazil," he said. "The whole thing makes you worried about the stability of Bridgestone/Firestone. Nobody wants to lose that business, but suppliers can only go so far to cut corners and cut costs."
The root problem is the hyper-competitiveness of suppliers and the drive to cut costs by tire makers, four suppliers said. "Competition is getting tougher so you start cutting corners you didn´t take before and everything turns sour," a supplier said.