Ford Pinto Case

Ford Motor Company in the 1970sThe PintoProblemCost Benefit AnalysisEthical IssuesChangeAlternativesRecommendation

Agenda

Young and ambitious new president

Foreign competitors entering N.A. market

No small car to compete with VW Beetle and others

Ford Motor Company in the 70s

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

The Pinto

Testing found several safety defects@ 25mph+ the gas tank would rupture in an

accident

@ 30mph+ rear endings would cause the gas tank to leak and the rear of the car to be folded up into the back seats

@ 40mph+ the car doors would jam

Problem

Gas Tank ConfigurationBehind Rear-Axle Tank

Pros: Cons:

• More Luggage space Not as safe in rear-end collisions

• Industry standard – felt it was safer

Gas Tank ConfigurationOver-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

Cost Benefit AnalysisWith Current Gas Tank With Safety Alteration

180 burn deaths Cost = $11 per vehicle

180 serious burns Total = $137 million

2100 Pintos burned

Costs = $200 000 per death

$67 000 per serious injury Second alternative = Rubber Bladder

$700 per car Cost = $5.08 per vehicle

Total = $49.5 million Total ~= $64 million

Ford employees

Lee Iacocca

Henry Ford II

Ethical Issues

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

Ford Employees

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?

Lee Iacocca

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

Henry Ford II

It’s 1973 and you are the Recall Coordinator:

Field reports are coming in reporting the following:Rear end collisionsFires, andFatalities

You must decide whether to recall the Pinto

Assignment

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

Six Relevant Facts

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

Six Relevant Facts

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 requirementsHowever, reports are not bumps and bruises,

the reports are fatal explosionsThere is a tremendous amount of pressure

placed on Recall Manager to agree with the consensus of the company that “Safety is not an issue”

Pertinent Ethical Issues & Points of Ethical Conflict

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 factoryWhich 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?

Pertinent Ethical Issues & Points of Ethical Conflict

Recall CoordinatorFord Motor CompanyFord Pinto ConsumersFord EmployeesFord Pinto Consumers’ PassengersMembers of the General Public involved in

Ford Pinto AccidentsGeneral Public

Relevant Affected Parties

If you recall the Pinto, you could lose your jobIf you recall the Pinto, you may save lives

Consumers, passengers, and general publicAccording to “The Cost of Dying in a Pinto”

report, costs outweigh the benefitsWill 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?

Possible Consequences

If you recall the Pinto, your fellow employees may lies their jobs

Will the general public accept the message Ford is sendingFord does not care if we kill you and your

family?

Possible Consequences (cont)

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 doTo myself to be honest, especially when saving

people’s lives are involvedTo my fellow coworkers

Correcting manufacturer defects now ill uphold Ford’s reputation as an honest automobile dealer, ensuring repeat customers

Relevant Obligations

3 Levels of Ethical Guides1. 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?

Ethical Guides

What would you do?!?!?

Grimshaw v. Ford Motor CompanyEVIDENCE 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.

Lawsuits

Richard Grimshaw13-year old passenger in 1971 Ford PintoStruck 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

introductionJudge reduced to:

$2.5 million compensatory damages$3.5 million punitive damages

Grimshaw v. Ford Motor Company

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 1st time that an American corporation was prosecuted on criminal charges

Ford was acquitted in March; the case was too complex

After Grimshaw

Ford was first urged to recall the Pinto in 1974 by the nonprofit Center for auto Safety

Late in 1978, Ford recalled all 1971-1976 Pinto models (1.5 million cars)Modifications made:

Longer fuel filler neckPlastic shields

Protected from rear differentialProtected from rear shock absorber

How it Ends?