Tire Blowout problems of the 2002 Mercedes Benz C230

I have mercedes C230 2002, with oem michelin mxv4 plus 205/55 r16. One tire was blown and replaced 3 years ago. Now all tires develop huge cracks on the edge of tread and sidewall as well as inside of tread. Tires are in between 5/32nd and 7/32nd tread with 40k miles, and would be good to go for another 2 years easily. But, according to mercedes and michelin dealers (les schwab) tires unsafe to drive! I called michelin 866-866-6605 November 03-07, after 30 min conversation with les schwab manager involved, michelin admit manufacturing defect, and offered 45% off new tires purchase. Here is what michelin offer actually means: 1) 45% discount apply only to michelin and same mxv4 plus is $205/ea and it means $820 x0. 55 = $451 to pay. 2) I must pay dismount + mount + balance + disposal fees, which is $20 per tire x4 = $80, so total out of my pocket becomes $531 +tax!.