Question

In this discussion, you will engage in discourse about specific content from this topic. In the next topic, you will then complete a follow-up activity based on this discussion.

1. After reviewing the Ford Pinto Case Study answer the following questions.

If you were the CEO of Ford would you have made the modification to the Pinto to make it safer (and lost revenue) or would you have kept crossed your fingers hoping no one else was injured (thus keeping profits high)?

b. When a company admits they are wrong or they have made an unethical decision their company usually suffers financially due to several factors. What stakeholders were affected by the faults of the Pinto?

c. Ford claims that its Pinto met all of the government safety requirements for motor vehicles, but as you now know the Pinto was an extremely dangerous automobile if you were involved in a rear-end collision (and Ford was aware of this). In this case what is the difference between being in compliance with the law and exercising corporate ethics/social responsibility?  

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The Ford Pinto

There was a time when the “made in Japan” label brought a predictable smirk of superiority to the face of most Americans. The quality of most Japanese products usually was as low as their price. In fact, few imports could match their domestic counterparts, the proud products of Yankee know-how. But by the late 1960s, an invasion of foreign-made goods chiseled a few worry lines into the countenance of the U.S. industry. In Detroit, the worry was fast fading to panic as the Japanese, not to mention the Germans, began to gobble up more and more of the subcompact auto market.

Never one to take a back seat to the competition, Ford Motor Company decided to meet the threat from abroad head-on. In 1968, Ford executives decided to produce the Pinto. Known inside the company as “Lee’s car,” after Ford president Lee Iacocca, the Pinto was to weigh no more than 2,000 pounds and cost no more than $2,000.

Eager to have its subcompact ready for the 1971 model year, Ford decided to compress the normal drafting-board-to-showroom time of about three-and-a-half years into two. The compressed schedule meant that any design changes typically made before production-line tooling would have to be made during it.

Before producing the Pinto, Ford crash-tested various prototypes, in part to learn whether they met a safety standard proposed by the National Highway Traffic Safety Administration (NHTSA) to reduce fires from traffic collisions. This standard would have required that by 1972 all new autos be able to withstand a rear-end impact of 20mph without fuel loss and that by 1973 they be able to withstand an impact of 30 mph. The prototypes all failed the 20-mph test. In 1970 Ford crash-tested the Pinto itself, and the result was the same: ruptured gas tanks and dangerous leaks. The only Pintos to pass the test had been modified in some way–for example, with a rubber bladder in the gas tank or a piece of steel between the tank and the rear bumper.

Thus, Ford knew that the Pinto represented a serious fire hazard when struck from the rear, even in low-speed collisions. Ford officials faced a decision. Should they go ahead with the existing design, thereby meeting the production timetable but possibly jeopardizing consumer safety? Or should they delay production of the Pinto by redesigning the gas tank to make it safer and thus concede another year of subcompact dominance to foreign companies? Ford not only pushed ahead with the original design but stuck to it for the next six years.

What explains Ford’s decision? The evidence suggests that Ford relied, at least in part, on costbenefit reasoning, which is an analysis in monetary terms of the expected costs and benefits of doing something. There were various ways of making the Pinto’s gas tank safer. Although the estimated price of these safety improvements ranged from only $5 to $8 per vehicle, Ford evidently reasoned that the increased cost outweighed the benefits of a new tank design.

How exactly did Ford reach that conclusion? We don’t know for sure, but an internal report, “Fatalities Associated with Crash-Induced Fuel Leakage and Fires,” reveals the cost-benefit reasoning that the company used in cases like this. This report was not written with the pinto in mind; rather, it concerns fuel leakage in rollover accidents (not rear-end collisions), and its computations applied to all Ford vehicles, not just the Pinto. Nevertheless, it illustrates the type of reasoning that was probably used in the Pinto case.

In the “Fatalities” report, Ford engineers estimated the cost of technical improvements that would prevent gas tanks from leaking in rollover accidents to be $11 per vehicle. The authors go on to discuss various estimates of the number of people killed by fires from car rollovers before settling on the relatively low figure of 180 deaths per year. But given that number, how can the value of those individuals’ lives be gauged? Can a dollars-and-cents figure be assigned to a human being? NHTSA thought so. In 1972, it estimated that society loses $200,725 every time a person is killed in an auto accident (adjusted for inflation, today’s figure would, of course, be considerably higher). It broke down the costs as follows:

Future productivity losses

Direct                $132,000

Indirect                $41,300

Medical costs

Hospital               $700

Other               $425

Property damage       $1,500

Insurance administration        $4,700

Legal and court expenses      $3,000

Employer losses               $1,000

Victim’s pain and suffering     $10,000

Funeral                    $900

Assets (lost consumption)    $5,000

Miscellaneous accident costs   $ 200

Total per fatality             $200,725

Answer 1

1- For any automobile or responsible organization in the planet human life and safety has more value which can be neither compensate nor replaced. Had I been the CEO, I would have taken the safety issue to more priority than the profitability. When safety issue will be compromised it will have adverse impact on the goodwill of the brand and company which I will not afford.

b- All the stakeholders will be suffered due to fault in Pinto. It consist of the customer, employee, investors, suppliers and the society at large. These are essential for sustainance and survival of Pinto so any adverse happening to the brand will affect them badly.

c- The difference is that being in compliance with law can be seen as when some entity just do what the law have said only and can't do those things which are debarred by law so as not to have any litigation. Legal compliance deals with following law of the land but social responsibility and corporate ethics walk extramile than legal compliance and foresees safety and security of the customer as first priority. The latter deals with that to be done which is morally right and ethically correct.