Ford Motor Company in the 1970s The Pinto Problem Cost Benefit Analysis Ethical Issues Change Alternatives Recommendation

Young and ambitious new president Foreign competitors entering N.A. market No small car to compete with VW Beetle and others The demand for results and profits are the most important aspect of business

The Ford Pinto – a small car to compete with foreign car company competitors Pinto – weighed 2000 lbs and cost $2000 Rushed project led by Lee Iacocca Planning took 25 months compared to the industry norm 43 months

Testing found several safety 25mph+ the gas tank would rupture in an 30mph+ rear endings would cause the gas tank to leak and the rear of the car to be folded up into the back 40mph+ the car doors would jam

Behind Rear-Axle Tank Pros: Cons: More Luggage space  Not as safe in rear-end collisions Industry standard – felt it was safer

Over-the-Axle Tank Pros: Cons: Performed well in rear-end  Long “round-about” filler pipe collisions  Closer to passengers in back seat  Higher center of gravity  Reduced trunk space

With Current Gas TankWith Safety Alteration 180 burn deathsCost = $11 per vehicle 180 serious burnsTotal = $137 million 2100 Pintos burned Costs = $ per death $ per serious injurySecond alternative = Rubber Bladder $700 per carCost = $5.08 per vehicle Total = $49.5 millionTotal ~= $64 million

Ford employees Lee Iacocca Henry Ford II

Were they morally responsible to refuse to produce a car they knew would hurt the customer? Should they have put more effort into convincing Iacocca that this car was unsafe? Should they follow Iacocca’s commands regardless of their opinions since he is their superior in the company

Is Iacocca responsible for the safety of his customers? Should he maximize profits for the company at any costs? If safety defects are found after production, does he have a moral obligation to inform all his customers? Should Iacocca have established a working environment where his employees did not feel that they would lose their jobs for disagreeing with him? Safety? What safety.

Should Ford have trained his managers and presidents in safety? Does Ford have a responsibility to design a culture that encourages employees to bring up safety defects? Does Ford need to have a new policy that puts the has safety of their products more important than maximizing profits? Does Ford have a moral responsibility to do what is best for his shareholders

It’s 1973 and you are the Recall Coordinator: Field reports are coming in reporting the following: Rear end collisions Fires, and Fatalities You must decide whether to recall the Pinto

1. Before the Pinto, Ford was immersed in an intense, internal struggle between “Bunky” Knudson and Lee Iacocca over the company’s product line Major pressure to compete with German & Japanese compact cars 2. Iacocca and the compact car won the struggle The Pinto debuted in 1971 after the shortest (the most rushed) production in history 3. Ford is fully aware of the faulty fuel tank design; crash testing after debut revealed the fuel tank often ruptured during rear-end impact In Ford’s opinion, it is too late (or rather too costly) for redesign

4. The company’s president, Iacocca, insists: Keep the original gas tank design; costs need to be kept down for the “cost conscious” Pinto buyer Besides, “safety doesn’t sell.” 5. Colleagues, other Ford engineers, agree with Iacocca’s opinion about the faulty gas tank “Safety isn’t the issue, trunk space is.” 6. Reports show, “The Cost of Dying in a Pinto” outweigh the benefits by almost three times $137.5M cost vs. $49.5M benefits

The Pinto’s production was rushed and mistakes were clearly made: Do I ignore the field reports coming in? Do I recommend changes to current production? Do I recommend a total recall? According to the National Highway Traffic Safety Administration standards, the Pinto meets safety requirements However, reports are not bumps and bruises, the reports are fatal explosions There is a tremendous amount of pressure placed on Recall Manager to agree with the consensus of the company that “Safety is not an issue”

As the Recall Manager, will you be able to look at yourself in the mirror if more consumers are killed in their Pintos if you do not place the recall? As the Recall Manager, you were hired to determine when a product is too dangerous to the public due to defect and needs to be returned to the factory Which obligation comes first – obligation to Ford or the general public? With the intense pressure to make the Pinto a success, will you lose your job if you recall the car? Were any laws broken?

Recall Coordinator Ford Motor Company Ford Pinto Consumers Ford Employees Ford Pinto Consumers’ Passengers Members of the General Public involved in Ford Pinto Accidents General Public

If you recall the Pinto, you could lose your job If you recall the Pinto, you may save lives Consumers, passengers, and general public According to “The Cost of Dying in a Pinto” report, costs outweigh the benefits Will the benefits of recalling the Pinto now outweigh the costs in the long term both in financial and saved human life revenue? What type of reputation will Ford have once the general public finds out the company knew of the Pinto’s glaring defect, did not recall, and continued production?

If you recall the Pinto, your fellow employees may lies their jobs Will the general public accept the message Ford is sending Ford does not care if we kill you and your family?

To Ford to ensure our products sustain a certain level of quality after purchase – even if the product was poorly designed and produced To Ford’s consumers to ensure their safety when using our products – especially when the product was poorly designed and produced To the general public to ensure Fords’ products are safe To myself to do the job I was hired to do To myself to be honest, especially when saving people’s lives are involved To my fellow coworkers Correcting manufacturer defects now ill uphold Ford’s reputation as an honest automobile dealer, ensuring repeat customers

3 Levels of Ethical Guides 1. Professional: Fod believes safety doesn’t sell; buyers buy because of price point and special features 2. Community: The general public wants safe automobiles on the road 3. Personal: Do I believe my company’s stance on the Pinto’s safety? Would I allow my own family to drive Pintos – without the recall?

Grimshaw v. Ford Motor Company EVIDENCE Mrs. Gray, accompanied by 13-year old Richard Grimshaw, set out in the family’s new Pinto from Anaheim for Barstow to meet Mr. Gray in Barstow. As Mrs. Gray approached the Route 30 off-ramp where traffic was congested, she moved from the outer fast lane to the middle lane of the freeway. Shortly after this lane change, the Pinto suddenly stalled and coasted to a halt in the middle lane. A Ford Galaxie traveling immediately behind the Pinto was unable to avoid colliding with it. The Galaxie had been traveling from 50 to 55 miles per hour but before the impact had slowed to a speed of from 20 to 37 miles per hour. At the moment of impact, the Pinto caught fire and its interior was engulfed in flames. According to plaintiff’s expert, the impact of the Galaxie had driven the Pinto gas tank forward and caused it to be punctured by the flange or one of the bolts on the differential housing so that fuel sprayed from the punctured and entered the passenger compartment… When the occupants emerged from the vehicle, their clothing was almost completely burned off. Mrs. Gray died a few days later of congestive heart failure as a result of the burns. Richard Grimshaw managed to survive but only through heroic medical measures. He underwent numerous and extensive surgeries and skin grafts and faced additional surgeries over the next ten years. He lost portions of several fingers on his left hand, portions of his left ear, and his face required many skin grafts from various portions of his body.

Richard Grimshaw 13-year old passenger in 1971 Ford Pinto Struck from behind; exploded; badly burned over 90% of his body; 20 years reconstructive surgery Awarded $125 million in punitive damages $124 million profits made since Ford Pinto’s introduction Judge reduced to: $2.5 million compensatory damages $3.5 million punitive damages

On 1/15/80, Ford went on trial on charges of reckless homicide in the 1978 death of 3 Indiana teenagers who burned to death after their 1973 Pinto was hit from behind by a van Indiana state prosecutors alleged that Ford knew Pinto gasoline tanks were prone to catch fire during rear-end collisions but failed to warn the public or fix the problem out of concern for profits. The trial marked the 1 st time that an American corporation was prosecuted on criminal charges Ford was acquitted in March; the case was too complex

Ford was first urged to recall the Pinto in 1974 by the nonprofit Center for auto Safety Late in 1978, Ford recalled all Pinto models (1.5 million cars) Modifications made: Longer fuel filler neck Plastic shields Protected from rear differential Protected from rear shock absorber