Bridgestone 2004 Annual Report Download - page 55

53
Financial Section
defend the settlement and to defend each of the certified and purported class action lawsuits in the absence of a reasonable and approved
settlement.
In fiscal years 2004 and 2003, BSA has paid $59 million (¥6,371 million) and $96 million (¥11,088 million), respectively, for the direct
cost of voluntary tire recall and for product liability suits and claims, and class action settlements, net of proceeds from product liability
insurance recoveries. As a result of the payments, as of December 31, 2004 and 2003, BSA has recorded liabilities for matters related to the
voluntary tire recall and resulting litigation amounting to $78 million (¥8,097 million) and $140 million (¥14,965 million), respectively.
In the individual product liability lawsuits and claims, tire replacement claims and class action lawsuits, BSA’s approach is to offer a rea-
sonable settlement and to defend its position aggressively where such settlement is not possible. There can be no assurance that product lia-
bility lawsuits and claims, tire replacement claims and class action lawsuits will be resolved as currently envisioned and, accordingly, the
ultimate liability could be significantly higher than the recorded liability. However, in the opinion of BSA management, the ultimate dispo-
sition of these product liability lawsuits and claims, tire replacement claims and class action lawsuits could possibly be material to the results
of operations in any one accounting period but will not have a material adverse effect on the financial position or liquidity of BSA.
In November 2002, an attorney who had filed a purported class action suit alleging that all the BSA’s Steeltex tires (11 million of which
are estimated to be in service as of December 31, 2004) were defective, petitioned the NHTSA to reopen an investigation of such tires which
that agency had closed in April 2002. The NHTSA denied that petition in June 2003, and in March 2004, the court denied plaintiffs’ motion
for class certification. Plaintiffs then filed a renewed motion for class certification and another petition for NHTSA to investigate (i) all
Steeltex tires generally and (ii) those Steeltex tires used on ambulances. The NHTSA denied this petition in September 2004 and closed its
investigation, and the court denied plaintiffs’ renewed motion for class certification in February 2005. BSA management has thoroughly
investigated this issue, and continues to monitor the performance of the tires in question. However, except with regard to the February 2004
voluntary safety campaign addressed below, BSA (i) does not believe that a recall or similar action concerning its Steeltex tires is necessary or
appropriate; (ii) strongly believes that the related litigation is without merit; and (iii) plans to vigorously defend its position. Accordingly,
BSA has made no provision for any related contingent liability.
In February 2004, BSA announced a U.S. voluntary safety campaign to replace, free of any charge to consumers, approximately 230,000
tires (initially estimated at 297,000 tires). The tires are Firestone-brand Steeltex Radial A/T tires in size LT265/75R16, and in Load Range D,
which are on 2000–2002 and some early model year 2003 Ford Excursion vehicles. All the affected tires were made between March 1999 and
December 2002 at BSA’s plant in Joliette, Quebec, Canada, and none are presently being manufactured by BSA. BSA also agreed to replace
approximately 20,000 exported tires meeting the same criteria. BSA estimates that the total direct costs of the voluntary safety campaign will
approximate $30 million. The voluntary safety campaign is substantially complete at December 31, 2004.
Two securities cases filed in January 2001 against BSA and the Company, alleging both misrepresentations regarding the quality of the
tires previously under investigation by the NHTSA and violations of the U.S. Securities Exchange Act, were consolidated, and, in October
2002, dismissed. In February 2003, the plaintiffs’ motion to reopen the court’s judgment was denied by the court. Plaintiffs appealed, and in
October 2004, the appellate court reversed the trial court’s dismissal, returning the case to the latter court for further proceedings. In
November 2004, BSA filed a petition for rehearing, and BSA is now awaiting a decision on that petition. BSA and the Company intend to
vigorously defend themselves and believe these cases are without merit.
Several governmental authorities in Venezuela have conducted investigations of accidents in that country involving Ford Explorers
equipped with Firestone tires, many of which were produced by BSA’s subsidiary in Venezuela, to determine whether civil fines or other
penalties should be imposed upon responsible management of either BSA’s Venezuelan subsidiary and/or Ford of Venezuela, or upon those
companies themselves. These investigations remain open. The ultimate liability, if any, with respect to the Venezuelan investigations cannot
be specifically quantified. However, in the opinion of BSA management, the ultimate disposition of these investigations will not materially
affect the BSA’s financial position, results of operations or liquidity.
NOTE 18—SUBSEQUENT EVENTS
On February 23, 2005, the Company retired 30 million shares of common stock at a cost of ¥50,494 million ($484,541 thousand) in
accordance with the approval of the Company’s Board of Directors meeting held on February 18, 2005 subject to Section 212 of the
Code. The number of issued shares after the retirement is 833,102,321 shares.
On March 30, 2005, the shareholders of the Company approved payment of a cash dividend of ¥11.0 ($0.11) per share, or a total of
¥8,831 million ($84,742 thousand), to shareholders of record as of December 31, 2004. In addition, a stock option plan was approved,
which provides options to purchase 300 thousand shares of the Company’s common stock by directors and selected employees of the
Company. The exercise price is equal to the higher of either 1.05 times the monthly average closing market price of the Company’s
common stock traded in the Tokyo Stock Exchange in the month preceding the date of grant, or the closing market price of that on the
date of grant. The exercise period of the stock options is from April 1, 2007 to March 31, 2012.