Firestone tire case demonstrates that labor strife affects product quality

Princeton NJ -- Labor strife and poor morale on the factory floor can take a heavy toll on product quality, two Princeton economists suggest in a paper that reviews the production of defective Firestone tires during the mid-1990s, when managers and workers were battling.

"The evidence we have assembled suggesting that the labor dispute contributed to the production of many defective Firestone tires in the 1990s is circumstantial but broad and consistent," write economists Alan Krueger and Alexandre Mas.

"... this episode would serve as a useful reminder that a good relationship between labor and management can be in the company's interest."

The paper offers another window into the controversy over Firestone tires, which have been linked to 271 fatalities and more than 800 injuries, according to the National Highway Traffic and Safety Administration. In August 2000, Firestone and Ford announced the recall of 14.4 million tires. The most common source of failure of the recalled tires is tread separation, which causes a tire to blow out.

Krueger, the Bendheim Professor in Economics and Public Affairs, and Mas, a graduate student in economics, conclude that a disproportionate number of flawed tires were produced at Firestone's Decatur, Ill., plant during a 1994-96 labor dispute, compared to tires made before or after the dispute. During that time, the failure rate at Decatur also was higher than the rate at non-striking plants, and at a plant that had a strike but did not use replacement workers as Decatur did. Engineering tests also point in the same direction.

The economists also find that the production of defective tires was particularly high around the time wage concessions were demanded by Firestone and when large numbers of replacement workers worked alongside permanent workers who had returned after a strike.

With the issue in court, Firestone and labor-union leaders have different explanations for the tire failures, ranging from imperfect design to inexperienced replacement workers.

Krueger and Mas suggest that the role of labor strife is a major cause, and that faulty workmanship by novice replacement workers was not the only source of problem tires.

"It appears likely to us that something about the chemistry between the replacement workers and recalled strikers, or the cumulative impact of labor strife in general, created the conditions that led to the production of many defective tires," they write. "Frictions among production workers, supervisors and inspectors engendered by the strike and demand for labor concessions might also have played a role."

The economists suggest that the results provide a lesson for other employers.

"If antagonistic labor relations were responsible for many of the defects, even indirectly, this episode would serve as a useful reminder that a good relationship between labor and management can be in the company's interest," they write.

The paper is available at <www.irs.princeton.edu/wpframe.html>.