Strikes, Scabs, and Tread Separations: Labor Strife and the Production of Defective Bridgestone/Firestone Tires

This paper provides a case study of the effect of labor relations on product quality. We consider whether a long, contentious strike and the hiring of replacement workers at Bridgestone/Firestone’s Decatur plant in the mid-1990s contributed to the production of defective tires. Using several independent data sources, and looking before and after the strike and across plants, we find that labor strife at the Decatur plant closely coincided with lower product quality. Monthly data suggest that defects were particularly high around the time concessions were demanded and when large numbers of replacement workers and returning strikers worked side by side. Alan B. Krueger Alexandre Mas Industrial Relations Section Industrial Relations Section Firestone Library Firestone Library Princeton University Princeton University Princeton, NJ 08544 Princeton, NJ 08544 (609) 258-4046 (609) 258-0816 [email protected] [email protected] Do workers provide more effort and due diligence if they feel they are treated better? Does the labor relations climate affect the quality of production? Economic models of fairness (e.g., Rabin, 1993 and Fehr and Gächter, 2000) suggest that workers are more cooperative and less prone to commit sabotage if they feel they are treated well and in good faith. In addition, the dependence of worker effort on pay is an essential feature of efficiency wage models. Yet a relationship between worker treatment and the quality of production has proved difficult to establish. Quality is often unobserved or hard to measure. This paper provides new evidence on the impact of labor strife on the quality of production at the plant level by examining the incidence of defective Bridgestone/Firestone (B/FS) tires. In August 2000, Firestone and Ford jointly announced the recall of 14.4 million size P235/75R15 ATX, ATX II and Wilderness AT tires, some 6.5 million of them still on the road, mostly on Ford Explorers. The National Highway Traffic and Safety Administration (NHTSA) issued an advisory concerning several other sizes and models of Firestone tires in September 2000. NHTSA reported that the 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 rubber tread from the steel belts, causing the tire to blow out. One of every 400 tires produced in the Decatur, IL plant in 1995 was returned under warranty because of a tread separation by 2000. 1 The recall pertained to size P235/75R15 Firestone ATX and ATX II tires made in all Firestone plants from 1991 to 2000, and P235/75R15 Wilderness AT tires produced in the Decatur, IL plant from 1996 to 2000. On May 22, 2001 Ford announced plans to replace all Wilderness AT tires on certain Ford vehicles. In October 2001 Firestone recalled additional P235/75R15 tires and P255/70R16 Wilderness AT tires. 2 This figure is based on our calculations using warranty data provided by B/FS to NHTSA, and is an underestimate of the overall incidence of tread separations because not all tires were covered by the warranty program at the time of a tread separation, and because some owners may not have returned covered tires under the warranty program despite having a tread separation.