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Tuesday September 19 6:36 PM ET Continental Replacing 160,000 Tires in U.S.

WASHINGTON (Reuters) - Continental General Tire (news - web sites) Inc. said Tuesday it was voluntarily replacing about 160,000 16-inch ContiTrac tires in response to complaints pieces of the tread tore off.

The U.S. unit of German tire and auto components maker Continental AG (news - web sites) (CONG.DE) said roughly 140,000 tires were fitted as standard to about 38,000 Ford Motor Co.'s (NYSE:F - news) luxury sport utility vehicle, the Lincoln Navigator (news - web sites), in the 1998-99 model years.

Another 20,000 tires were supplied to the replacement market, Continental said.

Bernd Frangenberg, president and CEO of Continental, said a spike over the past seven months in the number of damage claims filed with the company from tread breaking off its tire and striking vehicles prompted the voluntary recall.

``We had 62 (damage claims) cases in total, of which more than half were in the last half year,'' he told Reuters in an interview in Charlotte.

``We never experienced such a spike and it never came up on our radar screen ... We were alarmed by that spike which happened practically after 36 months in use and which caused us to take this action.''

The tires were manufactured exclusively at the company's plant in Mayfield, Kentucky, where he said the company has good labor relations and ``very good quality'' manufacturing.

NHTSA confirmed the data provided by Continental General, and did not immediately open an investigation, he said.

``They reserved the right to come back to us for further queries and further data, in which case obviously we are fully cooperating with them.''

Vehicle owners were asked to visit their local Lincoln dealer for inspection of their tires, or visit their Continental General Tire dealer. The 17-inch versions of the ContiTrac were not affected.

Frangenberg said the customer satisfaction program should be complete in six to eight weeks and he rejected any comparison with a 6.5 million tire recall being conducted by the Firestone company for deadly tread separation problems.

``We do not have fatalities or rollovers, we know what the root cause is, we have taken a corrective action which we know is effective. And on top of that we are taking decisive and quick action,'' he said.

The Continental tire replacement program comes five weeks after Firestone, a unit of Japan's Bridgestone Corp (news - web sites). (5108.T), announced a massive voluntary recall of certain 15-inch tires, mostly fitted to Ford's best-selling mid-size SUV, the Explorer.

The Firestone problems have been linked to crashes involving 103 deaths and at least 400 injuries and have spawned numerous lawsuits.

Continental's shares initially tumbled on the news of the replacement program, losing 8.5 percent of their value before closing down 5.4 percent for the day.

The cost of the recall, ``will be in the single digit million figure,'' Frangenberg said. The first 10,000 replacement tires were shipped to dealers overnight and company sources said the recall would cost Continental about $5 million.

A Saudi Arabian car dealership alerted Ford to tread problems with the 16-inch ContiTrac tire in 1999, according to documents released by U.S. Congressional investigators in connection with their Firestone probe.

Ford, whose relations with Firestone have been strained by that recall, praised Continental.

``We believe Continental General Tire caught this issue early and together we're going to do everything we can to quickly inspect the tires and replace them, if necessary,'' Mark Hutchins, president of Lincoln Mercury, said in a statement.

Continental officials met with the U.S. National Highway Traffic Safety administration Tuesday to present their data and compare it with the agency's record of complaints.

-- Rachel Gibson (rgibson@hotmail.com), September 19, 2000