Bridgestone files massive fraud and deception suit against IBM

Tire manufacturer seeks untold level of damages related to IT system overhaul

UPDATED [6:15 PM]: IBM has issued a statement, included in the story.


In 2009, Bridgestone contracted with IBM for a comprehensive overhaul of its back-office IT system.

To say the Nashville tire manufacturer is displeased with the result doesn't begin to describe what is alleged in a 63-page complaint filed last week in U.S. District Court.

Because the lawsuit deals with proprietary information — from both Bridgestone and IBM — the complaint is heavily redacted, pages and pages of detail covered in bold black bars, only the odd descender of a lower-case letter peering from behind the curtain and the odd tantalizing — if ultimately immaterial — detail coquettishly exposed in the spare footnote.

What's apparent is this: Five years ago, Bridgestone wanted to upgrade its invoicing, accounting and delivery IT system. IBM promised it could do that, develop new modules and implement the necessary software to tie the new system with the existing infrastructure — called "middleware" in the tech parlance.

At first, it was just for Bridgestone's commercial tire operation, but the tire maker wanted to tie everything together and issued a second request for a company to conduct a feasibility study on tying the planned overhaul on the commercial sales side with the rest of its company. IBM, unsurprisingly, said it was "uniquely qualified" to implement this massive integration.

"IBM represented its design solution would, when finalized and implemented, provide BSAM with a fully integrated, next generation SAP OTC system which would efficiently and accurately orchestrate and execute all of the back office business functions involved in the BSAM North American Tire Operations (“BATO”) and Bridgestone Retail Operations (“BSRO”) from end-to-end of the OTC business cycle," the complaint alleges.

In short, IBM claimed if the planet was Bridgestone's back office, it could build a smarter planet.

In the end, Bridgestone paid IBM in excess of $78 million for this rebuild that took more than two years.

And after that 24-month wait, what did Bridgestone say was delivered? A "defective system [that] lost or deleted scheduled customer orders, would not process orders, duplicated, or partially processed orders and, for those limited orders that were processed, did not complete critical corresponding business applications."

As a result, Bridgestone hired SAP directly "to identify and resolve, or partially resolve, defects in IBM’s SAP implementation to allow [Bridgestone] to receive and deliver some orders." During this time, "IBM attempted but failed to resolve major defects in its own proprietary middleware. ... In many cases, IBM’s response to defects in its work was to make changes without any communication to BSAM, which caused other failures in the system which were ultimately tracked to IBM changes."

Bridgestone claims more than $200 million in lost revenue and extra costs as a result. Further, the tire company says IBM knew its system was not suitable, was not "next-generation" and assigned personnel without expertise to handle the design, roll-out and troubleshooting.

In a statement, IBM said "The claims against IBM are exaggerated, factually wrong and without merit. From the outset of this project, Bridgestone failed to meet critical commitments upon which IBM's performance depended. Ultimately, Bridgestone’s repeated failures had a significant impact on the project’s cost and schedule, and its decision to ignore IBM's warnings and prematurely roll-out the implementation across its entire business negatively impacted its North America operations. Bridgestone has elected to bring this matter to court. IBM worked hard to make this a successful project and regrets a dispute with a client. However, IBM is prepared to vigorously defend itself in this matter and demonstrate that Bridgestone's own errors made this a troubled project."

The company is suing for treble damages under the Tennessee Consumer Protection Act in addition to federal claims of fraud in the inducement, constructive fraud, misrepresentation, gross negligence and breach of contract.

Bridgestone is represented by Aubrey Harwell Jr. and Trey Harwell of Neal & Harwell, Charless Barrett, Don Barrett of Mississippi's Barrett Law Group and C. Michael Ellingburg of Daniel Coker Horton & Bell, also of Mississippi.