Memorandum TO: Jonathan Foster, Head of the Legal Analytics Department FROM: Sawyer Folks, Business Analyst DATE: April 27, 2015 SUBJECT: Ford Motor Company Background The Ford Motor Company has had a rather tarnished legal history. Ford got into some hot water in the 1990s and 2000s over multiple safety scandals. One of these scandals occurred in 1996 and involved faulty ignition switches that would short and cause fires. The ignition switch scandal then led to Ford being sued by State Farm for neglecting to release information about the faulty ignition switches and their tendency to start fires. Perhaps the most famous Ford safety scandal of all took place during the 1970s when Ford released the Pinto. As a consequence of a poor design, the fuel tank was located near the cars bumper and had virtually zero protection mechanisms in place. This design flaw led to many fatal explosions from the car being struck from behind. Ford ended up having to pay millions of dollars in civil cases as a result of injuries and deaths related to the design of the Pinto. Ford had to fork over $125 million dollars in damages in just one civil case, although this was a special case. There were other cases in which Ford executives were found innocent of any murder charges at all. There was a very diverse and wide spectrum of cases related to the Pinto incident. Ford does not only suffer from legal issues related to a lack of safety, but also to legal issues involving environmental
Ford would rather take the cost of the Pinto’s design error to a court decision than admit it cost a certain amount of compensation for injuries or deaths. “In Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757 (4th Dist. 1981) [1], the California Court of Appeal for the Fourth Appellate District reviewed Ford's conduct in painstaking detail, and upheld compensatory damages of $2.5 million and punitive damages of $3.5 million against Ford.” Each incident had a consequence, they were considering the cost of the company in choosing the cheap way out. Dell chose goodwill because of no major damages done, but put the majority blame on Sony. Ford is willing to take the cost of lawsuits as opposed to negotiating the value because it sets a standard payment amount. Ford is admitting a no
The legal issue is: Should Ford Motor Company be liable for the car accident of it’s Ford Pinto which caused fatal burns to Lilly Gray and permanent burn injuries to Richard Grimshaw? Should Ford Motor Company pay historical punitive damages because of the car defects that the senior management was knowledgeable of before pushing it into the consumer market?
There are a few concerns about harmful behavior of the FMC that should be discussed. A behavior is harmful when it wrongfully sets back the interest of others and has a high risk of harm. Obviously, the gravity of harm in this case is very high being that it is life threatening. Once a consumer has purchased the Pinto and drives it off the lot he is at risk to getting rear ended, and burned to death by a car fire or explosion. Since the weight of this harm is very severe, the low probability of the consumer having an accident doesn’t discount Ford’s unethical behavior. Indeed, driving a Ford Pinto would place a consumer’s life at risk. Also at stake are the interests of Pinto passengers and drivers of other vehicles who certainly are not willing to risk their lives so Ford can make an extra buck. Everyone has an interest in not getting injured or killed. Setting back the interest of consumers isn’t the only thing Ford Motor Company was responsible for.
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.
Ford Motor Company has tough competition with European and Japanese manufacturers, therefore the company did not respond well and suffered
You have to consider the Ford Motor Company’s reputation after they made the decision to not recall the Ford Pinto to
Ford and Firestone have been working together for over 100 years. Both companies began working together when their founders build a friendship in the beginning of the automotive revolution. Both companies were able to work together for many years without to many problems. But in 2001 both companies ran into an ethical dilemma that left both their reputations on the line.
The Elkhart County Grand Jury took up the matter and filed a charge of criminal homicide against Ford, the Automobile American Corporation that designed the Pinto car models. According to Elkhart County Grand prosecutor, Michael A. Cosentino, Ford was guilty of reckless homicide, because the company committed a conscious, plain, and unjustifiable neglect of harm that positioned the gas tank in the rear end of the car without proven protection. Besides, Ford engaged in negligence and substantial deviation from the acceptable standards of conduct. The major focus of the case entailed the expanding and assessment of acceptable standards the company violated in the process of manufacture of Pinto cars.
The customers (drivers of Ford) are the number one stakeholders that lost the most. They might not have lost much money or reputations, but they lost the one thing that you can never get back, their life.
The moral issues about the Ford Pinto is that they take their profit is more important than human life. They also did not inform the consumer about the facts of the Pinto. Lastly, they also lobbied the safety of the car to lowest standard (Shaw, Barry & Sansbury 2009, pp 97-99).
Ford has argued for over three decades that The Ford Motor Company is not at fault, but rather the other motorists who happened to rear end the Pinto drivers. Many accuse Ford of rushing the Pinto into production without proper testing leaving a faulty
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”.
Weakness - One of the weaknesses is higher cost compared to the competitors such as General Motors and Chrysler. In addition, Ford has an abundance of an expensive supply of vehicle models that cost to maintain. Ford is also known to have bad financial management and late in innovation.
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.
Everyone except Ford’s top executives, who in an internal document cited the potential danger. So not only did they know about it, but they calculated that it would be cheaper to pay out possible injury claims then it would be to recall all the vehicles. This ethical dilemma came to a head when three teenage girls were killed in Indiana while in a Ford Pinto. With the bad press and with company officials being indicted with negligence and homicide, Ford was forced to recall all their Pinto vehicles. Ethical issues in the auto industry regarding product safety are dangerous and are linked to human lives. The decisions that Ford executives made had a direct impact on those three teenage girls and the blood was left in their hands. This is just one of many faulty decisions made in automakers history that helped mold the unethical decisions made by Volkswagen in the most recent ethical issue facing the auto industry.