Case Study : Toyota And Ford Essay

In August of 1978 three teenage girls were driving a Ford Pinto and were struck from behind. The three girls died because the Ford Pinto’s fuel tank ruptured from the collision and burst into flames. There was a big debate about the safety of the Ford Pinto to its proneness to its fuel tank catching on fire in low-speed rear-end

Hitchcock Automotive Services owns Puente Hills Toyota (PHT), which is a privately held company. In addition to, Hitchcock Automotive Services owning Puente Hills Toyota, they also own two other Toyota dealerships, a Volkswagen, Ford, Hyundai, and BMW dealership, all located in California. Puente Hills Toyota was a large Toyota dealership with about $85 million in annual sales. PHT employs around 145 employees and was awarded several excellent performance awards, including the Toyota’s President Award for overall excellence for the past 13 years (Merchant & Van der Stede, 2012). The dealership’s organizational structure was similar to those of others within the industry, other than they combined the new and used vehicle sales department. This organizational structure worked with Hitchcock Automotive Service’s philosophy of keeping manufacturers and customers happy. (Merchant & Van der Stede, 2012)

There are many different cases where people have been critically injured or have died from burn-related injuries from the ruptured the Pino gas tank. This case study specifically discusses the 1978 untimely deaths of Lynn Marie Ulrich, Dana Ulrich, and Judy Ann. Between 1971 and 1978, the Pinto was responsible for a number of fire-related deaths. It was the death of these teenagers that lead brought the controversy of the Ford Pinto’s faulty gas tank placement to a climax resulting in criminal homicide charges for the automaker. Ford’s CEO Henry Ford II and Ford’s new president Lee Iacocca were responsible for the launch of the Ford Pinto. To stay ahead of the growing competition, The Pinto was not to weigh over 2,000 pounds and not costs not to exceed $2,000. Ford officials knew that the Pinto represented a serious fire issue when struck from the rear, but were desperate to expedite the vehicle’s release, the Pintos timing was set just under 25 months. Tooling has already been kicked off, so when crash tests revealed a serious defect in the gas tank, it was too late for any design modifications. The tooling was well underway. Therefore, Ford’s president decided it would be too costly to make changes in the Pinto’s gas tank location pushing ahead with the original design which went unchanged for six years. Any changes to the low-cost Ford Pinto would result in an increased price, thus possibly making it less desirable by small car buyers. Iacocca understood that people shopping for compact cars were watching every dollar, One Ford engineer explained, “the process of elasticity on these subcompacts is extremely tight. You can price yourself right out of the market by adding $25 to the production cost of the model”.

Ford Motor Company, American automotive corporation founded in 1903 by Henry Ford and 11 associate investors. (htt28) It is the multinational corporation and the world's third largest automaker based on worldwide vehicle sales. The Company operates in two segments: Automotive and Financial Services. Automotive includes Ford North America, Ford South America, Ford Europe, and Ford Asia Pacific Africa region. Financial services include Ford Motor Credit Company and Other Financial Service. The Company manufactures or distributes automobiles across six continents. Its automotive brands include Ford and Lincoln. Other Financial Services includes a range of businesses, including holding companies and real

Ford executives were under a great deal of pressure to produce a smaller, more gas efficient automobile. Japanese and German automobile sales were rapidly increasing. These competitive forces drove Ford’s executive team to respond by rushing the design process of the Ford Pinto. By 1973, the Pinto was well into production when engineers discovered a flaw in the gas tank, which was located just under the rear bumper. They discovered that if the vehicle suffered a rear-end collision over 20 mph, the gas tank could break and spill gasoline into the passenger compartment, potentially resulting in a fire. The remedy for the flaw was a part that cost $11.00 per vehicle. Executives at Ford knew the company had followed all safety standards and regulations. At that time, automobile safety standards only needed gas tanks to withstand a collision under 20 mph. An internal cost-benefit analysis revealed the costs would be substantially higher to fix the design flaw that the costs associated with any potential damages due to collisions and loss of life. The public remained unaware until Mother Jones journalist, Mark Dowie broke the story in 1977. Fueled by the media, what followed was a frenzy of public outcry and court trials.

Personal evaluation of this case would take into consideration the fact; one engineer did offer a document indicating and estimate for the cost of value refitting which would prevent the Ford Pinto from bursting into flames should a rear end collision occur. A simple, $1, plastic gadget weighing one pound fitted over the gas tank bolts would have prevented the tank from being punctured. Conclusion was that "it was more economical to let people die and settle the suits afterward" (Newton and Ford, 2008). Put simply, the Ford corporate heads believed no project was worth manufacturing if the cost-benefit indicated a greater cost than the benefit. Further evaluation of the analysis indicated if the

Toyota faced a challenge related to the poor visibility and low quality of a supplier for the Suprima model. The Japanese brand, being related to a top quality product and a Just in Time manufacturing scheme could not afford to have stock out problems nor not meeting consumers’ demand for quality.

Henry Ford was an engineer from Detroit, Michigan who had an idea. By 1902, Ford had attempted several times to produce a gas powered vehicle, but with little capital, he realized that his attempts were futile. Ford approached a man by the name of Alexander T. Malcomson about the possibility of manufacturing an automobile. Malcomson, a friend of the family and wealthy coal merchant was reluctant at first but finally agreed with Ford, and decided to assit Ford financially with his endeavor. With Malcomsons investment and Ford's engineering skills a partnership was formed and in mid June of 1903, papers of incorporation for the Ford Motor Company were filed in Dearborn, Michigan.

I think Pinto case raised some serious issue of abusing human rights and not behaving ethically in the world of business. Any business/service should never ever put a value on human life and not take consideration of a known deadly danger. Ford had an option as well as the solution to design the car in a way that prevented cars from exploding; however they refused to implement it.   They thought that it was cost effective not to fix dangerous condition than to spend the money to save people in spite of the fact that the only added cost was $ 11 per vehicle.

Ford was not in violation of the law in any way and had to make the decision whether to incur a cost to fix the obvious problem internally. There were several options for the fuel system redesign. The option most seriously considered would have cost Ford an additional $11 per vehicle. Under the strict $2000 budget restriction, even this nominal cost seemed large. In addition, Ford had earlier based an advertising campaign on safety, which failed miserably. Therefore, there was a corporate belief, attributed to Lee Iacocca himself, of “safety doesn’t sell”. (2)

There was strong competition for Ford in the American small-car market from Volkswagen and several Japanese companies in the 1960’s. To fight the competition, Ford rushed its newest car the Pinto into production in much less time than is usually required to develop a car. The regular time to produce an automobile is 43 months but Ford took 25 months only (Satchi, L., 2005). Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that

United States Securities and Exchange Commission, (2012).Ford motor company 10-k . Retrieved from Ford Motor Company website: http://phx.corporate-ir.net/phoenix.zhtml?c=87772&p=irol-SECText

Profitability (performance) ratios are used to assess a company’s ability to create equity as compared to its debt and other appropriate expenses created during a particular time frame. A favorable analysis of profitability ratios will reveal that a company’s value is higher than a competitor’s value.

The purpose of this report is to examine if the reasoning behind well-known car manufacturer, Toyota’s loss of revenue and leading market position is alone as a result of extensive product recalls following a fatal crash of a Lexus ES 350 on August 28th 2009. The journal article, “Toyota Crisis: Management Issue?” (Yuanyuan Feng 2010) provides an outline of the key factors that triggered the 2009 Toyota crisis, and explores whether the fall in the company’s returns by 19% were caused purely as a result of the recall and safety concerns, or something much deeper.

Ford Motor Company was incorporated in Delaware in 1919. They acquired the business of a Michigan company, also known as Ford Motor Company, which had been incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. They are one of the world’s largest producers of cars and trucks. They and their subsidiaries also engage in other businesses, including financing vehicles.