The Ford Motor Company and the Pinto Case

The Ford automobile company began producing the Ford Pinto line up in 1968. The Chief Executive Officer (CEO) at the time of the pinto production was Lee Iacocca. The reason for the decision to mass produce the pinto in a short amount of time is because American automobiles were losing market share to smaller Japanese imports. Lee Iacocca wanted his engineers to design and manufacture a compact car that weighed less than 2,000 pounds and cost less than 2,000 dollars. Because of this monumental task from Lee Iacocca, that meant the ford pinto automobile would have to be built within 25 months instead of the typical 43 months. There are many safety test that is mandated by the National Highway Traffic Safety Administration before a vehicle

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.

This paper explores how ethical issues of Pinto case have affected the Ford Motor Company business environment. A number of factors suggest that Ford Motor Company was negligent and violated its code of ethics. In this paper, we will review the corporate culture mindset which prioritizes profit over the value of human life for the purpose financial gain.

In this essay, I will argue that Ford Motor Company’s business behavior was unethical as demonstrated in the Ford Pinto Case. Ford did not reveal all the facts to consumers about a harmful gas tank design in the Ford Pinto. They tried to justify their decision to sell an unsafe car by using a Cost-Benefit Analysis which determined it was cheaper to sell the cars without changing to a safer gas tank. The price of not fixing the gas tanks is human injuries and fatalities. By choosing not to make the Pinto a safer vehicle Ford placed a price on the head of every consumer. Ford’s primary concern was to maximize profits. Ford had a duty and ethical responsibility to customers to

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 is America's one of the largest car manufacturer and seller. In year 1987 it faces an external business environment change in the form of new warranty policy announcement by its major competitors General Motor, which changes the current philosophy of warranty in U.S car market. This policy change may have implications not only on Ford’s sales and market share but also on various departments within organization (such as manufacturing, quality assurance, parts and service, and extended service plans) and their dealer network. In answer, Ford executives have to respond through a best suitable course of action by carefully analyzing the current market variables.

In May of 1968, the Ford Motor Company, based upon a recommendation by then vice-president Lee Iacocca, decided to introduce a subcompact car and produce it domestically.  In an effort to gain a large market share, the automobile was designed and developed on an accelerated schedule.  During the first few years sales of the Pinto were excellent, but there was trouble on the horizon.

White Collar Crime, known by many as a form of crime that is greatly overlooked throughout the criminal justice system, has proven itself time and time again to be just as dangerous and damaging to those affected as all other crimes combined. There have been many cases throughout our nation’s past that have not only scarred, but ended hundreds of lives as a result of White Collar Crime. One in particular, is the popularly known Ford Pinto Case. The constant want for more, more money, more product, more success, by many top corporation leaders throughout the United States, has resulted in deathly consequences, in which those responsible receive very little repercussions for. In pursuit for these great things, Ford Motor Company was willing to anything necessary to remain at the top of the auto industry. As stated in the article, Case: The Ford Pinto, throughout Detroit, home of Ford Motor Company, worry had quickly turned to panic as Japanese and German subcompact vehicles began to take over the market (Shaw & Berry, 2001). Due to Ford’s relentless desire to stay competitive with the many other successful car companies throughout the world, the decision was made to create the Ford Pinto, in hopes of giving them the edge they needed. Little did buyers know, the creation of this vehicle would be the cause of several deaths and injuries as a result of Ford Motor Company’s willingness to do anything necessary in order to generate more revenue

On August 10, 1978 three young girls died in a 1973 Ford Pinto after being stuck from the rear by a driver in a van. The Ford Pinto was completely engulfed in flames and the accident resulted in the death of the three young girls. Today, the debate continues regarding whether or not The Ford Motor Company was responsible for this case and many other cases involving the Pinto bursting into flames resulting in disfigurement or death.

In the mid to late 1960’s American automobile manufacturing was being dominated by Japanese imports. These imports, smaller in size than the domestic vehicles at the time, offered an economical and dependable alternative to what American automobiles offered. In order to remain competitive with these Japanese imports Ford chief executive officer Lee Iacoca instructed the Ford manufacturing company to come up with a vehicle for the 1971 sales year to compete with these Japanese imports. The normal time for design and production for a new vehicle line is 43 months but Iacoca ordered the process to be reduced to 25 months in order to compete. The timeline was met but a rear-end impact study was not conducted until after the car was already on sales lots. Drawn to the relatively inexpensive price for a vehicle at the time, Lily Gray purchased a 1972 Ford Pinto. This is where the production flaw of the Pinto was first revealed. Gray was traveling with 13 year old Richard Grimshaw on the highway when she had to slow to avoid a broke down vehicle. Also trying to avoid the broke down vehicle a Ford Galaxy traveling at approximately 50 miles per hour rear ended the Pinto. Almost immediately the Pinto burst into flames, both passengers had severe burns on their bodies, and later Lily Gray would pass away as a result of the burns from the crash.

The means were limited design time and reducing costs. By cutting costs, Ford knowingly created a product which could prove dangerous and fatal to its consumers. Does Ford’s ends justify its means? Ford did create a sub-compact that sold extremely well and competed fiercely with foreign imports. The goal of the Ford Pinto was met. The costs of this win were substantial however. The money that Ford tried to save by not recalling the vehicle was spent when Ford recalled the Pinto, and extra was spent in compensatory and punitive damages in lawsuits. So the costs that Ford tried to avoid were incurred anyway along with extra.

The primary reason why Ford designed the VEP was that Ford believed its stock was undervalued and the undervalued stock was limiting the company 's ability to use its stock for acquisitions or to attract, retain or incentivize employees. Ford thought the VEP would enhance the value of its outstanding shares because the recapitalization will highlight its cash reserves and cash flow generating capacity, and also indicates management 's confidence in the future of the business. In addition, Ford believed the adjustments in the employee incentive plans by the recapitalization will tie Ford management 's compensation even more closely to the performance of its stock price.

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

The Cost benefit analysis is a financial model where companies or government establishments implement on their decision making. The model simply evaluates costs and benefits of a certain decision which enables the organization to choose the “right” option. (O’Farrell, R.,n.d.) The beauty of the CBA model lies in its simplicity, the chosen option is easily justifiable, when the costs are higher than the benefits then there is no compelling reason to make that decision. (O’Farrell, R. ,n.d.) In addition to its simplicity, the model is applicable to various types of decisions, it enable