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Crossfire

Who Is Responsible for the Ford-Firestone Tire Blowout?

Aired September 7, 2000 - 7:30 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL PRESS, CO-HOST: Tonight: an apology.

(BEGIN VIDEO CLIP)

MASATOSHI ONO, CEO, BRIDGESTONE/FIRESTONE: I apologize to you and the American peoples.

(END VIDEO CLIP)

PRESS: And finger-pointing.

(BEGIN VIDEO CLIP)

JACQUES NASSER, CEO, FORD MOTOR COMPANY: Ford did not know that there was a defect with the recalled tires until we virtually pried the data from Firestone's hands.

(END VIDEO CLIP)

PRESS: Who is responsible in the Ford-Firestone tire blowout? And is the answer more government regulation?

ANNOUNCER: Live from Washington: CROSSFIRE.

On the left, Bill Press; on the right, Robert Novak. In the CROSSFIRE: Sue Bailey, National Highway Traffic Safety administrator, and Bob Levy, senior fellow at the Cato Institute.

PRESS: Good evening and welcome to CROSSFIRE.

As if Firestone and Ford weren't already in enough trouble, Attorney General Janet Reno today announced she's weighing a possible Justice Department investigation into problems with those faulty Firestone tires, held responsible now for 250 injuries and 88 fatalities. Reno's warning comes the day after CEOs of both companies were marched before a congressional firing squad.

Firestone apologized. Ford blamed Firestone. But members of Congress shot them both down. Senator Arlen Specter even proposed legislation holding them responsible for second-degree murder. The Department of Transportation is also coming under fire for not acting sooner. Members of Congress want to know: What did Ford, Firestone and federal regulators know, when did they know it, and why didn't they do anything about it? So do we -- Bob.

ROBERT NOVAK, CO-HOST: Sue Bailey, the -- Senator Specter is a serious person, former district attorney of Philadelphia -- a veteran senator -- wants to make these people -- wants to consider these people guilty of second-degree murder.

What do you think of that?

SUE BAILEY, NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION: I think that would be an issue for the Justice Department.

NOVAK: You don't have an opinion on that?

BAILEY: Well, it's very serious, but we are in the middle of an investigation. And there's nothing at this time within our jurisdiction or out statutes that would allow us to pursue a criminal investigation.

NOVAK: All right, let me try something else. The senior Democrat on the Senate Judiciary Committee had this to say. And let's take a look at it.

(BEGIN VIDEO CLIP)

SEN. PATRICK LEAHY (D-VT), JUDICIARY COMMITTEE: Frankly, if people are being killed by these tires, they're being killed by this negligence, then somebody ought to go to jail.

(END VIDEO CLIP)

NOVAK: Agree or disagree? If they're being killed, shouldn't somebody go jail?

BAILEY: Again, I think that's a question for the Justice Department. Clearly, if we find, at the end of our investigation, there is a defect, we will go through a variety of steps. One includes a recall, so that we can prevent future deaths. And in fact if there were a reason to refer it for further legal action, we could do so.

NOVAK: Now , you are being asked to help along the passage of a criminal penalty for this sort of thing. And Ralph Nader, the consumer advocate -- who I think is running for president now...

BAILEY: I think so.

NOVAK: ... had this to say. Let's take a look at that.

(BEGIN VIDEO CLIP)

RALPH NADER, GREEN PARTY PRESIDENTIAL CANDIDATE: Congress has four weeks to act. I will guarantee you that if Congress does not enact a criminal penalty before it leaves office, the tire- and auto- industry lobbyists will stop the Congress next year from acting. It's got to be done now for the safety of millions of motorists. (END VIDEO CLIP)

NOVAK: Do you feel any urgency to have that done now?

BAILEY: Well, again, our investigation is not a criminal investigation. And the penalties we could impose would be civil penalties.

NOVAK: No, that isn't the question. The question is whether you think the law should be changed?

BAILEY: In order to allow us...

NOVAK: To have a criminal penalty, to invoke a criminal penalty. That's up to Congress. Would you be with the consumer advocate, Mr. Nader, in saying Congress should impose a criminal penalty on this?

BAILEY: If there were criminal actions, then clearly that would be something you'd consider.

PRESS: Let me ask you, Mr. Levy, to sort of -- in the same direction -- whether it's baby pajamas or toaster ovens or car tires, would you agree that a company that knowingly markets a defective product should be held responsible?

BOB LEVY, CATO INSTITUTE: I would say first of all that Congressman -- that Specter out to be the first to understand that you can't pass laws ex post facto. Criminal statutes have to be crimes at the time that the infraction is committed. To suggest now that there's going to be legislation that retroactively is going to criminalize certain acts, I think is preposterous and unconstitutional.

But more over, in order to press criminal charges, you have to show what the lawyers call scienter: that is, there has to be knowledge that you're doing something wrong. You also have to show intent. Now, doesn't mean that the executives desire to kill people. But it does mean that they were so egregiously reckless, that their activities rose to the level of intentional conduct.

There was a substantial certainty of outcome. You have to prove that beyond reasonable doubt. And in a criminal case, you get all the protections the 4th, 5th, 6th, and 8th Amendments of the Constitution. That's quite a burden -- different from a civil case.

PRESS: You anticipated and answered my third question, which was about the Specter legislation -- which, by the way, I don't think he said he intended to grandfather Ford and Firestone in. I think he was looking perspectively.

But let me go back now to my first question, which is a simple question. If a company knowingly markets a defective product -- whatever it is -- maybe car tires -- should they be held responsible?

LEVY: There's more to the burden of proof than just knowingly marketing a defective product. I mean, there are all sorts of products that have what we commonly call design defects. But we appraise the risk of those products versus the utility of those products and we allow those products to be marketed.

PRESS: Well...

LEVY: Now, if it's a negligence infraction, then of course that takes the element of intent out of it. So there would be no criminal charges.

PRESS: Well...

LEVY: I follow your point. And I would say this: If they knowingly market a defective product, if they try to cover up the fact that they knew, if they do not warn consumers about it, if their actions lead to such reckless behavior that it rises to the level of intent, then I'm all for prosecuting them under criminal

(CROSSTALK)

PRESS: All right, then let's look a little closer at this particular case quickly, thanks to "Time" magazine, which laid out the timeline for this. Back in 1992 -- this just didn't happen -- 1992, the first lawsuits were filed against Firestone over these tires; 1998, the first reports of tire failures in Saudi Arabia arrived. They were recalled, by the way, the next year, 1999, in Saudi Arabia.

Earlier this year, spring of 2000, Firestone tires were recalled in Thailand, Malaysia, Venezuela, Ecuador and Colombia. Not until August of this year were the tires recalled in the United States. Isn't there clear evidence there that these companies knew, and they stonewalled, and they took no action?

LEVY: Well, there may be. It's an evidentiary issue. It has to be proven in a court of law beyond reasonable doubt. I remind you that the driving conditions in Venezuela and Saudi Arabia are quite different. In Saudi Arabia, for example, they were alleging puncture problems. There were bad repair, hyperinflation. They were involved in 16-inch tires, not 15-inch tires. So there's no necessary linkage between what happened in Saudi Arabia or Venezuela and what happened in the United States.

But subject to proof, yes, if they violated criminal sanctions, they ought to be prosecuted.

NOVAK: Dr. Bailey, does the name Sam Boyden mean anything to you?

BAILEY: No.

NOVAK: Sam Boyden testified before Congress this week. He was a researcher of the Illinois headquarters of a State Farm Insurance Company. He said he sent an e-mail to your agency, National Highway Traffic Safety Agency, on July 22, 1998, saying he received 21 reports concerning Firestone ATX tires, called the agency a year later, and expressed his concern again last December: no response from your agency. Why? Why no response?

BAILEY: By the way, I did not know his full name. But I do know about the e-mail. And that information did come in. That is one of the things I think we need to review here, whether or not these informal arrangements we have with insurance -- with that particular insurance company -- in fact, the only insurance company where they would contact us by e-mail or by phone.

And no one seems to be able to trace those phone calls, by the way, at this point.

NOVAK: So you're saying he didn't call?

BAILEY: No, I'm saying there's no one who has been able to verify that the phone calls were placed.

NOVAK: Or admit it. Or admit it.

BAILEY: But the e-mail did come in, in fact. And I am concerned about what did happened to that e-mail. I should say, however, that e-mail referred to 21 complaints out of over 40-million tires that were produced over six years. So it would not have still triggered an investigation.

NOVAK: There is an explanation that was given by the chairman of the Senate Commerce Committee, Tom Bliley. And it was brief and succinct. And let's look at it.

(BEGIN VIDEO CLIP)

REP. TOM BLILEY (R), CHAIRMAN, COMMERCE COMMITTEE: The federal government's highway safety watch dog, that dog apparently was asleep.

(END VIDEO CLIP)

NOVAK: True?

BAILEY: Not true. What we knew and when we knew it is important here. What we knew was that there were 46 complaints over 10 years for 47-million tires that were produced. That's not enough to warrant an investigation. And when we knew -- it's the problem, too. The bigger issue here is: Should we have known about the foreign recalls? Would that have promised sooner action? Probably.

NOVAK: Now, I have to ask you a question. Rodney Slater, your boss, the secretary of Transportation, was asked by these committees to come up to the Hill to testify. He was in Washington yesterday. Why didn't he come up?

BAILEY: The secretary makes safety his number-one priority. This is an important issue to him. He's behind this all the way. He did, however, have confidence in me and the staff and felt that we could work with the Congress in these hearings in an appropriate way.

NOVAK: But secretary, you've only been on the job three weeks, haven't you?

BAILEY: That's true.

NOVAK: Wouldn't you think the secretary of commerce, who had been in there, would think this is important enough to come up?

BAILEY: I think he thinks it's very important, but I think he felt that my three weeks of intense briefings and review of the situation allowed me and the staff to be able to work with Congress.

NOVAK: OK. We're going to have to take a break.

After tonight's show, Bob Levy of Cato takes your questions. The address, cnn -- cnn.com/crossfire. And Bill -- Bill Press and I will be back with our guest after these messages to question how much government regulation should there be to protect the American people.

(COMMERCIAL BREAK)

NOVAK: Welcome back to CROSSFIRE. The deaths of 88 Americans have been blamed on faulty Firestone tires, and 6 1/2 million tires have been recalled. Are the tire makers criminally culpable? Are the federal regulators inept and weak? Or do we just need better drivers?

We're asking Bob Levy of the Cato Institute and Sue Bailey, National Highway Traffic Safety administrator -- Bill.

PRESS: Madam Administrator, as you know, this whole crisis didn't start can with the federal agency or with Congress. It started with a lawsuit filed out in East Texas, a 14-year-old girl who was killed when her family's Ford Explorer rolled over. And the attorney in that case didn't even contact your agency, because, he told "TIME" magazine this week -- quote -- "It had become just another underfunded government regular with little power to police or penalize."

Why are you such a toothless tiger?

BAILEY: Well, in this case, I don't think we were toothless. I think we didn't have the information like that information from claims and settlement, and we didn't have the information about the foreign recalls.

Had we had that, coupled with the information that we were aware of, the database that we did have, the investigation would have started sooner.

PRESS: So you're telling me that there's an American manufacturer who's selling a product and then recalling a product in Saudi Arabia or in Venezuela or in Ecuador, and you don't even know about it?

BAILEY: Exactly.

PRESS: I mean, shouldn't you know about it?

BAILEY: We should know about that, and we are seeking additional authority so that the manufacturer is obligated to provide us with that information. We can ask for it now, but in this case we had no reason to know that. They should...

PRESS: They're not required -- they're not required to tell you?

BAILEY: At this time they're not, but they will be.

PRESS: Is it also true that right now you're using the same tests for tires that you've been using since 1968?

BAILEY: That's true.

PRESS: Isn't that part of the problem?

BAILEY: It's not part of the problem in this case. These tires passed the test in 1997, and let me just tell you that test is at 95 degrees, not dissimilar to Saudi Arabia. It's at pounds per square inch, 32. It is for a long endurance test. It's at 88 percent the maximum load. The test is fairly similar.

Now, the thing is we do need to update that test. It's 30 years old. It's too old, but it probably wouldn't have changed anything in this case.

NOVAK: Bob Levy, I am a great admirer of Cato Institute and its philosophy. I believe the less government, the better. But I do believe there are proper functions for government, and that is protecting the citizenry, the health of the citizens in a very complicated technological society. You agree with that?

LEVY: Well, I do think that when there are 88 people that are dead and there are a couple of hundred others that have been injured, it's very tempting to use this case as a platform upon which to construct a whole new array of federal regulations, but this is exactly the wrong time to be doing that. We have to take a step back and take an objective look at the circumstances and decide whether more government is a good idea. And I would make the case that it is not a good idea.

I don't mean that the laws shouldn't be enforced that were on the books with respect to this particular incident, but I mean with respect to later incidents, the next incident. It is not a good idea, in particular because government regulations have adverse consequences.

Government bureaucrats -- and I'm not being critical here; this is just the natural state of things -- have perverse incentives. After all, if there's a recall and there are no injuries involved, if we have a recall and indeed there are no injuries, government gets credit for the recall. There may not have been any injuries even without the recall, but if there is no recall and injuries occur, government will be blamed.

So the natural inclination, of course, is more recalls and more regulations than the facts justify.

NOVAK: Do you have a quick reaction to that?

BAILEY: Well, in fact, I think it's just the opposite. This is exactly the right time to do this.

I think our agency needs appropriate authority to act to require that the information about those foreign recalls would have been available to us, and I think we need the resources and the funding to do so effectively.

NOVAK: You know, I think that the federal government usually messes things up, usually fouls things up tremendously, but if more regulation, more regulation -- I'll say that -- had saved those 88 lives by not having these defective tires on the road, this isn't, you know -- this isn't a complicated physics problem. If the tires had been found to be defective, they wouldn't have had these deaths, isn't that worth a little more regulation?

LEVY: I'm not arguing for more regulation. I think, for example, regulation of nuclear power plants is perfectly appropriate. I'm saying we have to consider each case on its merits: the degree of endangerment, the likelihood that a problem is going to occur. And we have to take into account the costs that regulation imposes. And we also have to look, most importantly, at whether there are alternative means of accomplishing the same thing.

The market metes out a very fierce discipline. Just ask the stockholders of Ford and Firestone. They understand private litigants mete out and discipline. Look at what happened to the tobacco companies with a $145 billion punitive verdict.

There's Consumers Union, there's underwriters laboratories, all of which monitor this situation. And here in this particular case we have perfect proof that private monitoring can be effective, because after all it was all brought about by a TV reporter and by State Farm Insurance Company, both of whom have incentives to see that these circumstances don't arise.

PRESS: So he's saying you have no role in this.

BAILEY: We have a clear role in this.

PRESS: Let me ask you about that role and how it may have been better. This is not the first recall of Firestone tires. There was one back in 1978, 14 1/2 million tires were recalled, Jimmy Carter was president. Carter administration and Congress both proposed tougher testing, a lot of new regulations on the same tire problem. Ronald Reagan became president in 1988 and he canceled all those regulations.

Do you think things might have been different if those new rules had been put in place at that time?

BAILEY: I do. In fact, we're going to seek again greater authority and more resources. In fact, I think that with the -- the role we've played this time, in fact, prompted the recall you saw. I'm not sure that would have occurred when it did if we had not begun an investigation. PRESS: Now, somebody's got to be held ultimately responsible. There was a lot of finger pointing last night. The president of Ford particularly pointed the finger at the other guy.

I'd like to remind you -- well, you were there -- what he said last night.

(BEGIN VIDEO CLIP)

JACQUES NASSER, CEO, FORD MOTOR COMPANY: There are almost 3 million Goodyear tires on Ford Explorers that have not had, as far as we know, one tread separation problem: 3 million tires on Explorers. So we know this is a Firestone tire issue, not a vehicle issue.

(END VIDEO CLIP)

PRESS: Chairman Tauzin doesn't look too impressed. Do you buy that? It's Firestone's problem?

BAILEY: I think this is mostly a tire problem, but clearly there's some connection here between the vehicle and the tires that resulted in the fatal crashes we saw with the rollovers.

NOVAK: What's your reaction to that? I mean, obviously, you say the market works, but what I saw was Ford saying, hey...

PRESS: Right.

NOVAK: ... no problem with us.

LEVY: First of all, I'd like to know what number compares with the 3 million. There were 3 million tires -- Goodyear tires on Ford Explorers, How many Firestone tires were on Ford Explorers? If it were, for example, 300 million, then you get a whole different picture than if it was 4 million.

I don't know -- I don't know the answer to that, and I don't think the sample size with respect to Goodyear tires on Ford Explorers, particularly of this size that we're concerned about, is large enough to draw any conclusions. But this is the kind of evidence that belongs in a courtroom.

PRESS: But back in 1989, there were memos in Ford, within the Ford company saying, when they were designing the Explorer, that we've got some problems with rollover so let's put less pressure in the tires rather than just changing the design of the vehicle. So how can Ford say it's Firestone's problem and not theirs?

BAILEY: I think it is mostly a Firestone problem, but I think there obviously was communication between these two manufacturers that indicated, by the way, they were concerned about whether or not we found out about it at the Department of Transportation. That shouldn't be the relationship. They should want to communicate with us.

NOVAK: Very briefly, aren't you appalled as a champion of free enterprise, as I am, the way these guys handled themselves when they're caught with a problem, of the equivocating and the saying "not my problem, the other guy"? Isn't that appalling performance?

LEVY: Well, indeed it's appalling, but we have not yet criminalized appalling behavior. If it rises to the level of a criminal infraction, let's prosecute them. If it's a civil infraction, let's hold them liable.

PRESS: That's got to be the last word. Mr. Levy, thank you very much for joining us again. Administrator Sue Bailey, nice to have you here on CROSSFIRE. Good luck working out this problem. Bob Novak and I, we'll solve it with our closing comments, coming up next.

(COMMERCIAL BREAK)

PRESS: Right now, it's your turn to take on our guest, Bob Levy, right after the show. He'll be in the CROSSFIRE chat room, just minutes away. Don't forget the address, cnn.com/crossfire.

Bob, I was stunned. I was stunned tonight to hear you make the case for government regulation. I congratulate you, and I want you to go one step further, and realize and salute -- this is a trial lawyer, Bob, a trial lawyer who started this in East Texas working on a contingency fee. Once again proves how important the trial lawyers are to this country.

NOVAK: The trial lawyers are the problem. See, I've always believed in police and safety. I don't believe in harassing business like you do, driving good organizations like Microsoft into trouble with antitrust. But one thing else I've got to say, why wasn't the secretary of transportation present there yesterday at those hearings, Rodney Slater?

That's the arrogance of the Clinton administration, and you can't make an excuse for him.

PRESS: No, no, no. I don't think it's arrogance. I just think it was a mistake. I think Secretary Slater should have been there, Bob. But it wouldn't...

NOVAK: It's arrogance.

(CROSSTALK)

PRESS: ... a trial lawyer working on a contingency fee.

NOVAK: It's the way they function on a everything. You and your trial lawyers.

PRESS: From the left, I'm Bill Press. Good night for CROSSFIRE.

NOVAK: From the right, I'm Robert Novak. Join us again next time for another edition of CROSSFIRE.

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