Name____________________________ Introduction to Business

Chapter 2 Assignment 2 Thursday, October 19, 2006

Directions: Read the following articles and answer the two questions that
follow each. You do not need to print this and can answer the
questions on a separate sheet of paper.

Thinking about Ethics: Firestone and Ford: Failure to Yield . . . or

Asleep at the Wheel?

For nearly a decade, lawsuits claimed that treads on tires manufactured by

Bridgestone/Firestone were peeling off without warning, causing Ford
Explorers to flip over. Mounting consumer complaints and damaging media
reports led to a federal investigation in 2000, putting pressure on Firestone
to recall 6.5 million defective tires. But the public soon learned that trouble
had started long before the massive tire recall.

As early as 1998, Ford Motor Company received reports of Firestone tire

tread separations on Ford Explorers in countries with hot climates, such as
Saudi Arabia and Venezuela. Ford took the complaints to Firestone because
it didn't have enough information to investigate the problem itself. (Tires
are the only significant part of the car that is guaranteed by the tire
supplier, not the automaker.) Firestone reassured Ford that the tire
problems resulted from a combination of variables: hot climate, fast drivers,
and improper tire care by consumers. Meanwhile, Ford was getting an early
warning about tire safety problems from its own warranty data. Still,
Firestone refused to recall the tires.

Convinced that its tire supplier was not owning up to problems, Ford stepped
in and unilaterally replaced Firestone tires on nearly 50,000 vehicles in 16
foreign countries. Problem is, neither Ford nor Firestone bothered to inform
U.S. authorities about the overseas tire recall. Soon similiar tire failures
began to occur in the United States at unusually high rates, and Ford
initiated its own investigation in early 2000. About that same time, the
federal government entered the scene.

Meanwhile, simmering tensions between the long-time partners burst into

open hostilities as Ford and Firestone engaged in bitter finger-pointing over
who was responsible for the tire problems and why they didn't come to light
sooner. Convinced that tread separations were related to inadequate tire
pressures, Firestone claimed Ford had ignored the tire maker's warnings to
boost the recommended tire pressure for Explorers. But Ford pinned the

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Name____________________________ Introduction to Business
Chapter 2 Assignment 2 Thursday, October 19, 2006

blame on Firestone, claiming the company stalled in analyzing and sharing its
warranty-claims data. Firestone executives, in turn, argued that Explorers
had been involved in 16,000 rollover accidents within the past decade—but
fewer than 10 percent had involved tread separation of Firestone tires.

In spite of over 100 deaths from accidents involving Explorers with

Firestone radials, Firestone and Ford admitted they didn't realize the
extent of the lethal tire problems until just before the recall. But one U.S.
congressman claimed both companies had been asleep at the wheel. "What
does it take to put a company . . . on notice that perhaps they've got a
defective product out there?" the congressman challenged. "You've got a
lawsuit, you've got people killed . . . Doesn't that tell you that something is
probably wrong with your product?"

Answer the following questions: Use the back if necessary.

1. Why did Bridgestone/Firestone wait so long to recall the defective

tires?

2. What lesson(s) can other companies learn from the Ford/Firestone

debacle?

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Name____________________________ Introduction to Business
Chapter 2 Assignment 2 Thursday, October 19, 2006

Keeping Pace with Technology and Electronic

Commerce: Recruiting the Thief to Protect the
Jewels

Shawn Fanning wasn't trying to change the world—or break the

law—when he wrote a software program that allowed computer
users to swap music files with each other. Fascinated by
technology, the 18-year-old just wanted to create a program that
would allow users to get great music over the Internet—for free.
But Fanning's simple idea, known as Napster, turned out to be
much more than just another software program.

Napster showcased the potential for "peer-to-peer file sharing,"

which is the direct transfer of files from one computer to
another without passing through a central server. Napster users
would access a directory stored on the company's central server,
and use Napster's free software to easily swap music files stored
on the personal computers of other users. Napster merely serves
as a clearinghouse that facilitates the exchange.

Outraged by the potential loss of royalties from music sales,

recording companies and artists slapped multiple lawsuits on
Napster, insisting the site violated copyright laws by illegally
distributing copyrighted music. The industry also claimed that
both Napster and Napsterites committed piracy by stealing
intellectual property and robbing artists of payment for
copyrighted work. But Napster argued that it wasn't doing
anything illegal or unethical. After all, it wasn't storing any songs
on its central server or distributing music directly from its Web
site. Napster was just the go-between for users who were simply
sharing music files for personal use—not stealing or distributing
songs for commercial profit. Furthermore, the availability of free

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Name____________________________ Introduction to Business
Chapter 2 Assignment 2 Thursday, October 19, 2006

music had not harmed CD sales and profits. In fact, CD sales

actually increased with Napster's soaring popularity.

Although both sides offered valid arguments, in 2001 a U.S.

Federal District judge shut Napster down. Still, Fanning's
invention has far-reaching possibilities—well beyond snagging
free copies of the latest Metallica song. For instance, Thomas
Middelhoff, CEO of Bertelsmann (the world's third-largest media
company), sees Napster's technology as a possible way to
transform his publishing house into a powerhouse for the
Internet Age. Middleoff invested $50 million in Napster to fund
the development of technology that will require users to pay a
small fee to download media files, and give peer-to-peer file
sharing the media industry's Good Housekeeping seal of approval.
Developing such technology, of course, is no easy feat. But, if
Fanning is successful, Napster could bring rock and roll to much
more than the music industry.

1. What ethical dilemmas surfaced as Napster gained popularity?

2. Why did Middelhoff "recruit the thief to protect the jewels"?