Bridgestone Settlement Could Benefit US Operations

International ratings agency Fitch Ratings has said that the settlement between Bridgestone and the Ford Motor Company could pave the way for Bridgestone to improve profitability in its US operations. The settlement, which is in relation to the infamous “August 2000 Firestone/Ford Explorer Tyre Recall” problem, will have a negative effect on Bridgestone’s financial position in the short term. Despite this Fitch affirmed Bridgestone’s senior unsecured foreign currency rating at ‘A’ with stable outlook and short-term rating at ‘F1.’

The analysts’ report follows Bridgestone’s announcement that Bridgestone Firestone North America Tire, LLC (Firestone) had reached a joint settlement with Ford resolving all financial issues associated with Firestone/Ford recall of 2000/2001. The agreement will see Firestone pay Ford $240-million. However, Fitch said, on a longer perspective it has a positive impact on the company’s operating performance.

If the legal dispute between Bridgestone and Ford were to have continued, Bridgestone would have faced the potential risk of a huge payment obligation if it were to lose the legal dispute completely, compensating most of the costs incurred at Ford for the voluntary campaign.

The Fitch report suggests that this way the two companies can restore the two relationship between the two companies. In turn, the implication is this could return Ford and Bridgestone’s relationship to its pre-recall status.

In August 2000 Bridgestone recalled 6.5 million Firestone tyres fitted to the Ford Explorer model, in response to a number of accidents caused by tread separation.